Small Business Size Standards: Transportation and Warehousing; Information; Finance and Insurance; Real Estate and Rental and Leasing, 62372-62403 [2020-21593]

Download as PDF 62372 Federal Register / Vol. 85, No. 192 / Friday, October 2, 2020 / Proposed Rules SMALL BUSINESS ADMINISTRATION 13 CFR Part 121 RIN 3245–AG90 Small Business Size Standards: Transportation and Warehousing; Information; Finance and Insurance; Real Estate and Rental and Leasing U.S. Small Business Administration. ACTION: Proposed rule. AGENCY: The U.S. Small Business Administration (SBA) proposes to increase its receipts-based small business size definitions (commonly referred to as ‘‘size standards’’) for North American Industry Classification System (NAICS) sectors related to Transportation and Warehousing, Information, Finance and Insurance, and Real Estate and Rental and Leasing. SBA proposes to increase size standards for 45 industries in those sectors, including eighteen (18) industries in NAICS Sector 48–49 (Transportation and Warehousing), eight (8) industries in NAICS Sector 51 (Information), ten (10) industries in NAICS Sector 52 (Finance and Insurance), and nine (9) industries in NAICS Sector 53 (Real Estate and Rental and Leasing). SBA’s proposed revisions relied on its recently revised ‘‘Size Standards Methodology’’ (Methodology). SBA seeks comments on its proposed changes to size standards in the above sectors, and the data sources it evaluated to develop the proposed size standards. DATES: SBA must receive comments to this proposed rule on or before December 1, 2020. ADDRESSES: Identify your comments by RIN 3245–AG90 and submit them by one of the following methods: (1) Federal eRulemaking Portal: www.regulations.gov, following the instructions for submitting comments; or (2) Mail/Hand Delivery/Courier: Khem R. Sharma, Ph.D., Chief, Office of Size Standards, 409 Third Street SW, Mail Code 6530, Washington, DC 20416. SUMMARY: SBA will post all comments to this proposed rule on www.regulations.gov. If you wish to submit confidential business information (CBI) as defined in the User Notice at www.regulations.gov, you must submit such information to U.S. Small Business Administration, Khem R. Sharma, Ph.D., Chief, Office of Size Standards, 409 Third Street SW, Mail Code 6530, Washington, DC 20416, or send an email to sizestandards@ sba.gov. Highlight the information that you consider to be CBI and explain why you believe SBA should hold this information as confidential. SBA will review your information and determine whether it will make the information public. FOR FURTHER INFORMATION CONTACT: Jorge Laboy-Bruno, Ph.D., Economist, Office of Size Standards, (202) 205–6618 or sizestandards@sba.gov. SUPPLEMENTARY INFORMATION: To determine eligibility for Federal small business assistance, SBA establishes small business size definitions (usually referred to as ‘‘size standards’’) for private sector industries in the United States. SBA uses two primary measures of business size for size standards purposes: Average annual receipts and average number of employees. SBA uses financial assets for certain financial industries in Sector 52 and refining capacity, in addition to employees, for the petroleum refining industry in Sector 31–33 to measure business size. In addition, SBA’s Small Business Investment Company (SBIC), Certified Development Company (CDC/504), and 7(a) Loan Programs use either the industry-based size standards or the alternative size standards based on tangible net worth and net income to determine eligibility for those programs. In September 2010, Congress passed the Jobs Act (Pub. L. 111–240, 124 Stat. 2504, September 27, 2010), (Jobs Act) requiring SBA to review all size standards every five years and make necessary adjustments to reflect current industry and market conditions. In accordance with the Jobs Act, in early 2016 SBA completed the first 5-year review of all size standards—except those for agricultural enterprises for which size standards were previously set by Congress—and made appropriate adjustments to size standards for a number of industries to reflect current industry and Federal market conditions. During the previous 5-year comprehensive review of size standards under the Jobs Act, SBA reviewed the receipts-based size standards for fortytwo (42) industries and one (1) exception within NAICS Sector 48–49, twenty (20) industries within Sector 51, thirty-nine (39) industries in Sector 52, and twenty-four (24) industries and one (1) exception in Sector 53. These reviews of receipts-based size standards occurred during October 2010 to December 2013. SBA’s analysis of the then-available relevant industry and Federal contracting data supported lowering size standards for twenty-four (24) industries and one (1) exception in these sectors. However, taking into consideration economic conditions at the time, SBA decided to either retain these size standards at existing levels or bring them up to the relevant common size standard. In the final rules, SBA increased size standards for ninety-three (93) of those industries and one (1) exception, including twenty-two (22) industries in NAICS Sector 48–49 (77 FR 10943, February 24, 2012), fifteen (15) industries in NAICS Sector 51 (77 FR 72702, December 6, 2012), thirty-six (36) industries in NAICS Sector 52 (78 FR 37409, June 20, 2013), and twenty (20) industries and one (1) exception in NAICS Sector 53 (77 FR 58747, September 24, 2012). SBA changed the basis for measuring the size of one industry (NAICS code 522293, International Trade Financing) from assets to annual receipts. SBA retained the size standards for the remaining thirty-two (32) industries in these sectors. Table 1, Size Standards Revisions During the Prior Comprehensive Review, provides a summary of these revisions by NAICS sector. jbell on DSKJLSW7X2PROD with PROPOSALS2 TABLE 1—SIZE STANDARDS REVISIONS DURING THE PRIOR COMPREHENSIVE REVIEW Number of size standards increased Number of size standards lowered Number of size standards maintained Transportation and Warehousing ........... Information .............................................. Finance and Insurance ........................... Real Estate and Rental and Leasing ..... 43 20 39 25 22 15 36 21 0 0 0 0 21 5 2 4 0 0 1 0 ................................................................. 127 94 0 32 1 Sector name 48–49 .............. 51 .................... 52 .................... 53 .................... All Sectors VerDate Sep<11>2014 Number of type of size standards changed Number of size standards reviewed NAICS sector 20:01 Oct 01, 2020 Jkt 253001 PO 00000 Frm 00002 Fmt 4701 Sfmt 4702 E:\FR\FM\02OCP2.SGM 02OCP2 jbell on DSKJLSW7X2PROD with PROPOSALS2 Federal Register / Vol. 85, No. 192 / Friday, October 2, 2020 / Proposed Rules Currently, there are twenty-seven (27) different size standards levels covering 1,023 NAICS industries and 14 subindustry activities (commonly known as ‘‘exceptions’’ in SBA’s table of size standards). Sixteen (16) of these size levels are based on average annual receipts, nine (9) are based on average number of employees, and two (2) are based on other measures. SBA also adjusts its monetary-based size standards for inflation at least once every five years. An interim final rule on SBA’s latest inflation adjustment to size standards, effective August 19, 2019, was published in the Federal Register on July 18, 2019 (84 FR 34261). SBA also updates its size standards, also every five years, to adopt the Office of Management and Budget’s (OMB) quinquennial NAICS revisions to its table of small business size standards. Effective October 1, 2017, SBA adopted OMB’s 2017 NAICS revisions for its size standards (82 FR 44886, September 27, 2017). This proposed rule is one of a series of proposed rules that will review size standards of industries grouped by various NAICS sectors. Rather than review all size standards at one time, SBA is reviewing size standards by generally grouping industries within various NAICS sectors that use the same size measure (i.e., employees or monetary). In the current review, SBA will review size standards in six (6) groups of NAICS sectors. (In the prior review, SBA reviewed size standards mostly on a sector by sector basis.) Once SBA completes its review of size standards for a group of sectors, it issues for public comments a proposed rule to revise size standards for those industries based on the latest available data and other factors deemed relevant by the SBA’s Administrator. Below is a discussion of SBA’s revised ‘‘Size Standards Methodology’’ (Methodology), available at www.sba.gov/size, for establishing, reviewing, or modifying receipts-based size standards that SBA has applied to this proposed rule. SBA examines the structural characteristics of an industry as a basis to assess industry differences and the overall degree of competitiveness of an industry and of firms within the industry. Industry structure is typically examined by analyzing four primary factors—average firm size, degree of competition within an industry, start-up costs and entry barriers, and distribution of firms by size. To assess the ability of small businesses to compete for Federal contracting opportunities under the current size standards, as the fifth primary factor, SBA also examines, for VerDate Sep<11>2014 20:01 Oct 01, 2020 Jkt 253001 each industry averaging $20 million or more in average annual Federal contract dollars, the small business share in Federal contract dollars relative to the small business share in total industry’s receipts. When necessary, SBA also considers other secondary factors as they are relevant to the industries and the interests of small businesses, including impacts of size standards changes on small businesses. Size Standards Methodology SBA has recently revised its Methodology for establishing, reviewing, or modifying size standards when necessary. See the notification in the April 11, 2019 issue of the Federal Register (84 FR 14587). The revised methodology is available on SBA’s size standards web page at www.sba.gov/ size. Prior to finalizing the revised Methodology, SBA issued a notification in the April 27, 2018 issue of the Federal Register (83 FR 18468) to solicit comments from the public and notify stakeholders of the proposed changes to the Methodology. SBA considered all public comments in finalizing the revised Methodology. For a summary of comments and SBA’s responses, refer to the SBA’s April 11, 2019 Federal Register notification. The revised Methodology represents a major change from the previous methodology, which was issued on October 21, 2009 (74 FR 53940). Specifically, in its revised Methodology SBA is replacing the ‘‘anchor’’ approach applied in the previous methodology with a ‘‘percentile’’ approach for evaluating differences in characteristics among various industries. Under the ‘‘anchor’’ approach, SBA generally evaluated the characteristics of individual industries relative to the average characteristics of industries with the anchor size standard to determine whether they should have a higher or a lower size standard than the anchor. In the ‘‘percentile’’ approach, SBA ranks each industry among all industries with the same measure of size standards (such as receipts or employees) in terms of four primary industry factors, discussed in the Industry Analysis subsection below. The ‘‘percentile’’ approach is explained more fully elsewhere in this proposed rule. Additionally, as the fifth factor, SBA evaluates the difference between the small business share in Federal contract dollars and the small business share in total industry’s receipts to compute the size standard for the Federal contracting factor. The overall size standard for an industry is then obtained by averaging all size standards supported by each primary factor. The PO 00000 Frm 00003 Fmt 4701 Sfmt 4702 62373 evaluation of the Federal contracting factor is explained more fully elsewhere in this proposed rule. SBA does not apply all aspects of its Methodology to all proposed rules because not all features are relevant for every industry covered by each proposed rule. For example, since all industries covered by this proposed rule have receipts-based size standards, the Methodology described in this proposed rule applies only to establishing, reviewing, or modifying receipts-based size standards. SBA’s entire Methodology is available on its website at www.sba.gov/size. This proposed rule includes information regarding the factors SBA evaluated and the criteria it used to propose adjustments to size standards for industries reviewed herein. This proposed rule also affords the public an opportunity to review and to comment on SBA’s proposed revisions to size standards for industries covered by the rule. Industry Analysis Congress granted SBA’s Administrator discretion to establish detailed small business size standards (15 U.S.C. 632(a)(2)). Specifically, Section 3(a)(3) of the Small Business Act (15 U.S.C. 632(a)(3)) requires that ‘‘. . . the [SBA] Administrator shall ensure that the size standard varies from industry to industry to the extent necessary to reflect the differing characteristics of the various industries and consider other factors deemed to be relevant by the Administrator.’’ Accordingly, the economic structure of an industry is the underlying basis for establishing, reviewing, or modifying small business size standards. In addition, SBA considers current economic conditions, its mission and program objectives, the Administration’s current policies, impacts on small businesses under current and proposed or revised size standards, suggestions from industry groups and Federal agencies, and public comments on the proposed rule. SBA also examines whether a size standard based on industry and other relevant data successfully excludes businesses that are dominant in the industry. The goal of SBA’s size standards review is to determine whether its existing small business size standards reflect the current industry structure and Federal market conditions and revise them, when the latest available data suggest that revisions are warranted. In the past, SBA compared the characteristics of each industry with the average characteristics of a group of industries associated with the ‘‘anchor’’ size standard. For example, in the E:\FR\FM\02OCP2.SGM 02OCP2 jbell on DSKJLSW7X2PROD with PROPOSALS2 62374 Federal Register / Vol. 85, No. 192 / Friday, October 2, 2020 / Proposed Rules recently completed first 5-year comprehensive review of size standards under the Jobs Act, $7 million (now $8.0 million due to the inflation adjustment in 2019; see 84 FR 34261 (July 18, 2019)) was considered the ‘‘anchor’’ for receipts-based size standards and 500 employees was the ‘‘anchor’’ for employee-based size standards. If the characteristics of a specific industry under review were similar to the average characteristics of industries in the anchor group, SBA generally adopted the anchor size standard for that industry. If the specific industry’s characteristics were significantly different from those in the anchor group, SBA assigned a size standard that was higher or lower than the anchor. To determine a size standard above or below the anchor size standard, SBA evaluated the characteristics of a second comparison group of industries with higher size standards. For industries with receipts-based standards, the second comparison group consisted of industries with size standards between $23 million and $35.5 million, with the weighted average size standard for the group equaling $29 million. For manufacturing industries and other industries with employee-based size standards (except for Wholesale Trade and Retail Trade), the second comparison group included industries with a size standard of 1,000 employees or 1,500 employees, with the weighted average size standard of 1,323 employees. Using the anchor size standard and average size standard for the second comparison group, SBA computed a size standard for an industry’s characteristic (factor) based on the industry’s position for that factor relative to the average values of the same factor for industries in the anchor and second comparison groups. Under the ‘‘percentile’’ approach, for each industry factor, an industry is ranked and compared with the 20th percentile and 80th percentile values of that factor among the industries sharing the same measure of size standards (i.e., receipts or employees). Combining that result with the 20th percentile and 80th percentile values of size standards among the industries with the same measure of size standards, SBA computes a size standard supported by each industry factor for each industry. In the previous Methodology, comparison industry groups were predetermined independent of the data, while in the revised Methodology they are established using the actual data. A more detailed description of the percentile method is provided in SBA’s VerDate Sep<11>2014 20:01 Oct 01, 2020 Jkt 253001 Methodology, available at www.sba.gov/ size. The primary factors that SBA evaluates to examine industry structure include average firm size, startup costs and entry barriers, industry competition, and distribution of firms by size. SBA also evaluates, as an additional primary factor, small business success in receiving Federal contracting assistance under the current size standards. Specifically, for the Federal contracting factor, SBA examines the small business share of Federal contract dollars relative to small business share of total receipts within an industry. These are, generally, the five most important factors SBA examines when establishing, reviewing, or revising a size standard for an industry. However, SBA will also consider and evaluate other secondary factors that it believes are relevant to a particular industry (such as technological changes, growth trends, SBA financial assistance, other program factors, etc.). SBA also considers possible impacts of size standard revisions on eligibility for Federal small business assistance, current economic conditions, the Administration’s policies, and suggestions from industry groups and Federal agencies. Public comments on proposed rules also provide important additional information. SBA thoroughly reviews all public comments before making a final decision on its proposed revisions to size standards. Below are brief descriptions of each of the five primary factors that SBA has evaluated for each industry being reviewed in this proposed rule. A more detailed description of this analysis is provided in the SBA’s Methodology, available at www.sba.gov/size. 1. Average firm size. SBA computes two measures of average firm size: Simple average and weighted average. For industries with receipts-based size standards, the simple average is the total receipts of the industry divided by the total number of firms in the industry. The weighted average firm size is the summation of all the receipts of the firms in an industry multiplied by their share of receipts in the industry. The simple average weighs all firms within an industry equally regardless of their size. The weighted average overcomes that limitation by giving more weight to larger firms. The size standard supported by average firm size is obtained by averaging size standards supported by simple average firm size and weighted average firm size. If the average firm size of an industry is higher than the average firm size for most other industries, this would PO 00000 Frm 00004 Fmt 4701 Sfmt 4702 generally support a size standard higher than the size standards for other industries. Conversely, if the industry’s average firm size is lower than that of most other industries, it would provide a basis to assign a lower size standard as compared to size standards for most other industries. 2. Startup costs and entry barriers. Startup costs reflect a firm’s initial size in an industry. New entrants to an industry must have sufficient capital and other assets to start and maintain a viable business. If firms entering an industry under review have greater capital requirements than firms do in most other industries, all other factors remaining the same, this would be a basis for a higher size standard. Conversely, if the industry has smaller capital needs compared to most other industries, a lower size standard would be considered appropriate. Given the lack of actual data on startup costs and entry barriers by industry, SBA uses average assets as a proxy of startup costs and entry barriers. To calculate average assets, SBA begins with the sales to total assets ratio for an industry from the Risk Management Association’s Annual Statement Studies, available at https://rmau.org/. SBA then applies these ratios to the average receipts of firms in that industry obtained from the Economic Census tabulation. An industry with average assets that are significantly higher than most other industries is likely to have higher startup costs; this in turn will support a higher size standard. Conversely, an industry with average assets that are similar to or lower than most other industries is likely to have lower startup costs; this will support either lowering or maintaining the size standard. 3. Industry competition. Industry competition is generally measured by the share of total industry receipts generated by the largest firms in an industry. SBA generally evaluates the share of industry receipts generated by the four largest firms in each industry. This is referred to as the ‘‘4-firm concentration ratio,’’ a commonly used economic measure of market competition. Using the 4-firm concentration ratio, SBA compares the degree of concentration within an industry to the degree of concentration of the other industries with the same measure of size standards. If a significantly higher share of economic activity within an industry is concentrated among the four largest firms compared to most other industries, all else being equal, SBA would set a size standard that is relatively higher than for most other E:\FR\FM\02OCP2.SGM 02OCP2 jbell on DSKJLSW7X2PROD with PROPOSALS2 Federal Register / Vol. 85, No. 192 / Friday, October 2, 2020 / Proposed Rules industries. Conversely, if the market share of the four largest firms in an industry is appreciably lower than the similar share for most other industries, the industry will be assigned a size standard that is lower than those for most other industries. 4. Distribution of firms by size. SBA examines the shares of industry total receipts accounted for by firms of different receipts and employment sizes in an industry. This is an additional factor SBA considers in assessing competition within an industry besides the 4-firm concentration ratio. If the preponderance of an industry’s economic activity is attributable to smaller firms, this generally indicates that small businesses are competitive in that industry and would support adopting a smaller size standard. A higher size standard would be supported for an industry in which the distribution of firms indicates that most of the economic activity is concentrated among the larger firms. Concentration is a measure of inequality of distribution. To determine the degree of inequality of distribution in an industry, SBA computes the Gini coefficient, using the Lorenz curve. The Lorenz curve presents the cumulative percentages of units (firms) along the horizontal axis and the cumulative percentages of receipts (or other measures of size) along the vertical axis. (For further detail, see SBA’s Methodology on its website at www.sba.gov/size.) Gini coefficient values vary from zero to one. If receipts are distributed equally among all the firms in an industry, the value of the Gini coefficient will equal zero. If an industry’s total receipts are attributed to a single firm, the Gini coefficient will equal one. SBA compares the degree of inequality of distribution for an industry under review with other industries with the same type of size standards. If an industry shows a higher degree of inequality of distribution (hence a higher Gini coefficient value) compared to most other industries in the group this would, all else being equal, warrant a size standard that is higher than the size standards assigned to most other industries. Conversely, an industry with lower degree of inequality (i.e., a lower Gini coefficient value) than most others will be assigned a lower size standard relative to others. 5. Federal contracting. As the fifth factor, SBA examines the success small businesses are having in winning Federal contracts under the current size standard as well as the possible impact a size standard change may have on Federal small business contracting VerDate Sep<11>2014 20:01 Oct 01, 2020 Jkt 253001 opportunities. The Small Business Act requires the Federal government to ensure that small businesses receive a ‘‘fair share’’ of Federal contracts. The legislative history also discusses the importance of size standards in Federal contracting. To incorporate the Federal contracting factor in the size standards analysis, SBA evaluates small business participation in Federal contracting in terms of the share of total Federal contract dollars awarded to small businesses relative to the small business share of industry’s total receipts. In general, if the share of Federal contract dollars awarded to small businesses in an industry is significantly smaller than the small business share of total industry’s receipts, all else remaining the same, a justification would exist for considering a size standard higher than the current size standard. In cases where small business share of the Federal market is already appreciably high relative to the small business share of the overall market, SBA generally assumes that the existing size standard is adequate with respect to the Federal contracting factor. The disparity between the small business Federal market share and industry-wide small business share may be due to various factors, such as extensive administrative and compliance requirements associated with Federal contracts, the different skill set required to perform Federal contracts as compared to typical commercial contracting work, and the size of Federal contracts. These, as well as other factors, are likely to influence the type of firms within an industry that compete for Federal contracts. By comparing the small business Federal contracting share with the industrywide small business share, SBA includes in its size standards analysis the latest Federal market conditions. Besides the impact on Federal contracting, SBA also examines impacts on SBA’s loan programs both under the current and revised size standards. Sources of Industry and Program Data SBA’s primary source of industry data used in this proposed rule is a special tabulation of the Economic Census from the U.S. Census Bureau (www.census.gov/econ/census). The tabulation based on the 2012 Economic Census is the latest available, which SBA used for evaluating industry characteristics and developing size standards in this proposed rule. The special tabulation provides industry data on the number of firms, number of establishments, number of employees, annual payroll, and annual receipts of companies by Industry (6-digit level), PO 00000 Frm 00005 Fmt 4701 Sfmt 4702 62375 Industry Group (4-digit level), Subsector (3-digit level), and Sector (2-digit level). These data are arrayed by various classes of firms’ size based on the overall number of employees and receipts of the entire enterprise (all establishments and affiliated firms) from all industries. The special tabulation also contains information for different levels of NAICS categories on average and median firm size in terms of both receipts and employment, total receipts generated by the four and eight largest firms, the Herfindahl-Hirschman Index (HHI), the Gini coefficient, and size distributions of firms by various receipts and employment size groupings. In some cases, where data were not available due to disclosure prohibitions in the Census Bureau’s tabulation, SBA either estimated missing values using available relevant data or examined data at a higher level of industry aggregation, such as at the NAICS 2-digit (Sector), 3digit (Subsector), or 4-digit (Industry Group) level. In some instances, SBA’s analysis was based only on those factors for which data were available or estimates of missing values were possible. To evaluate some industries that are not covered by the Economic Census, SBA used a similar special tabulation of the latest County Business Patterns (CBP) published by the U.S. Census Bureau (www.census.gov/programssurveys/cbp.html). Similarly, to evaluate industries in NAICS Sector 11 that are also not covered by the Economic Census and CBP, SBA evaluated a similar special tabulation based on the 2012 Census of Agriculture (www.nass.usda.gov) from the National Agricultural Statistics Service (NASS). Besides the Economic Census, Agricultural Census and CBP tabulations, SBA also evaluates relevant industry data from other sources, when necessary, especially for industries that are not covered by the Economic Census or CBP. These include the Quarterly Census of Employment and Wages (QCEW, also known as ES–202 data) (www.bls.gov/cew/) and Business Employment Dynamics (BED) data (www.bls.gov/bdm/) from the U.S. Bureau of Labor Statistics. Similarly, to evaluate certain financial industries that have assets-based size standards SBA examines the data from the Statistics on Depository Institutions (SDI) database (www5.fdic.gov/sdi/main.asp) of the Federal Deposit Insurance Corporation (FDIC) data. Finally, to evaluate the capacity component of the Petroleum Refiners (NAICS 324110) size standard, SBA evaluates the petroleum production data from the Energy E:\FR\FM\02OCP2.SGM 02OCP2 62376 Federal Register / Vol. 85, No. 192 / Friday, October 2, 2020 / Proposed Rules Information Administration (www.eia.gov). To calculate average assets, SBA used sales to total assets ratios from the Risk Management Association’s Annual eStatement Studies, 2016–2018 (https:// rmau.org). To evaluate Federal contracting trends and evaluate one exception in Sector 48–49 and one exception in Sector 53, SBA examined the data on Federal prime contract awards from the Federal Procurement Data System—Next Generation (FPDS– NG) (www.fpds.gov) for fiscal years 2016–2018. To assess the impact on financial assistance to small businesses, SBA examined its internal data on 7(a) and 504 loan programs for fiscal years 2016–2018. For some portion of impact analysis, SBA also evaluated the data from the System of Award Management (www.sam.gov). Data sources and estimation procedures SBA uses in its size standards analysis are documented in detail in SBA’s Methodology, which is available at www.sba.gov/size. jbell on DSKJLSW7X2PROD with PROPOSALS2 Dominance in Field of Operation Section 3(a) of the Small Business Act (15 U.S.C. 632(a)) defines a small business concern as one that is: (1) Independently owned and operated; (2) not dominant in its field of operation; and (3) within a specific small business definition or size standard established by SBA Administrator. SBA considers as part of its evaluation whether a business concern at a proposed size standard would be dominant in its field of operation. For this, SBA generally examines the industry’s market share of firms at the proposed or revised size standard as well as the distribution of firms by size. Market share and size distribution may indicate whether a firm can exercise a major controlling influence on a national basis in an industry where a significant number of business concerns are engaged. If a contemplated size standard includes a dominant firm, SBA will consider a lower size standard to exclude the dominant firm from being defined as small. Selection of Size Standards In the Methodology SBA applied to the first 5-year comprehensive review of size standards, SBA adopted a fixed number of size standards levels as part of its effort to simplify size standards. In response to public comments to the 2009 Methodology white paper, and the 2013 amendment to the Small Business Act (section 3(a)(8)) under section 1661 for the National Defense Authorization Act of Fiscal Year 2013 (‘‘NDAA 2013’’) (Public Law 112–239, January 2, 2013), VerDate Sep<11>2014 20:01 Oct 01, 2020 Jkt 253001 in the revised Methodology, SBA has relaxed the limitation on the number of small business size standards. Specifically, section 1661 of NDAA 2013 states ‘‘SBA cannot limit the number of size standards, and shall assign the appropriate size standard to each industry identified by NAICS.’’ In the revised Methodology, which is used in the ongoing, second 5-year review of size standards, SBA calculates a separate size standard to each NAICS industry. However, to account for errors and limitations associated with various data SBA evaluates in the size standards analysis, SBA will round the calculated size standard value for a receipts-based size standard to the nearest $500,000, except for agricultural industries in Subsectors 111 and 112 for which the calculated size standards will be rounded to the nearest $250,000. This rounding procedure will be applied both in calculating a size standard for each of the five primary factors and in calculating the overall size standard for the industry. As a policy decision, SBA will continue to maintain the minimum and maximum levels for both receipts-based and employee-based size standards. Accordingly, SBA will not generally propose or adopt a size standard that is either below the minimum level or above the maximum, even though the calculations yield values below the minimum or above the maximum. The minimum size standard reflects the size an established small business should be to have adequate capabilities and resources to be able to compete for and perform Federal contracts (but does not account for small businesses that are newly formed or just starting operations). On the other hand, the maximum size standard represents the level above which businesses, if qualified as small, would outcompete much smaller businesses when accessing Federal assistance. With respect to receipts-based size standards, SBA has established $6 million and $41.5 million, respectively, as the minimum and maximum size standard levels (except for most agricultural industries in NAICS Subsectors 111 and 112). These levels reflect the current minimum of $6.0 million and the current maximum of $41.5 million. The industry data seems to suggest that $6 million minimum and $41.5 million maximum size standards would be too high for agricultural industries. Evaluation of Industry Factors As mentioned earlier, to assess the appropriateness of the current size standards SBA evaluates the structure of PO 00000 Frm 00006 Fmt 4701 Sfmt 4702 each industry in terms of four economic characteristics or factors, namely average firm size, average assets size as a proxy of startup costs and entry barriers, the 4-firm concentration ratio as a measure of industry competition, and size distribution of firms using the Gini coefficient. For each size standard type (i.e., receipts-based or employeebased) SBA ranks industries both in terms of each of the four industry factors and in terms of the existing size standard and computes the 20th percentile and 80th percentile values for both. SBA then evaluates each industry by comparing its value for each industry factor to the 20th percentile and 80th percentile values for the corresponding factor for industries under a particular type of size standard. If the characteristics of an industry under review within a particular size standard type are similar to the average characteristics of industries within the same size standard type in the 20th percentile, SBA will consider adopting as an appropriate size standard for that industry the 20th percentile value of size standards for those industries. For each size standard type, if the industry’s characteristics are similar to the average characteristics of industries in the 80th percentile, SBA will assign a size standard that corresponds to the 80th percentile in the size standard rankings of industries. A separate size standard is established for each factor based on the amount of differences between the factor value for an industry under a particular size standard type and 20th percentile and 80th percentile values for the corresponding factor for all industries in the same type. Specifically, the actual level of the new size standard for each industry factor is derived by a linear interpolation using the 20th percentile and 80th percentile values of that factor and corresponding percentiles of size standards. Each calculated size standard is bounded between the minimum and maximum size standards levels, as discussed before. As noted earlier, the calculated value for a receipts-based size standard for each industry factor is rounded to the nearest $500,000, except for industries in Subsectors 111 and 112 for which a calculated size standard is rounded to the nearest $250,000. Table 2, 20th and 80th Percentiles of Industry Factors for Receipts-Based Size Standards, shows the 20th percentile and 80th percentile values for average firm size (simple and weighted), average assets size, 4-firm concentration ratio, and Gini coefficient for industries with receipts based size standards. E:\FR\FM\02OCP2.SGM 02OCP2 62377 Federal Register / Vol. 85, No. 192 / Friday, October 2, 2020 / Proposed Rules TABLE 2—20TH AND 80TH PERCENTILES OF INDUSTRY FACTORS FOR RECEIPTS-BASED SIZE STANDARDS Simple average receipts size ($ million) Industries/percentiles Industries, excluding Subsectors 111 and 112 20th percentile .................................................. 80th percentile .................................................. Industries in Subsectors 111 and 112 20th percentile .................................................. 80th percentile .................................................. Estimation of Size Standards Based on Industry Factors An estimated size standard supported by each industry factor is derived by comparing its value for a specific industry to the 20th percentile and 80th percentile values for that factor. If an industry’s value for a particular factor is near the 20th percentile value in the distribution, the supported size standard will be one that is close to the 20th percentile value of size standards for industries in the size standards group, which is $8.0 million. If a factor for an industry is close to the 80th percentile value of that factor, it would support a size standard that is close to the 80th percentile value in the distribution of size standards, which is $35.0 million. For a factor that is within, above, or below the 20–80th percentile range, the size standard is calculated using linear interpolation based on the 20th percentile and 80th percentile values for that factor and the 20th percentile and 80th percentile values of size standards. For example, if an industry’s simple average receipts are $1.9 million that would support a size standard of $11.5 million. According to Table 2, the 20th percentile and 80th percentile values of average receipts are $0.83 million and $7.52 million, respectively. The $1.9 Weighted average receipts size ($ million) Average assets size ($ million) 4-firm concentration ratio (%) Gini coefficient 0.83 7.52 19.42 830.65 0.34 5.19 7.9 42.4 0.686 0.834 0.06 0.83 1.48 13.32 0.07 0.88 1.7 12.3 0.608 0.908 million is 15.9 percent between the 20th percentile value ($0.83 million) and the 80th percentile value ($7.52 million) of simple average receipts (($1.9 million¥$0.83 million) ÷ ($7.52 million¥$0.83 million) = 0.159 or 15.9%). Applying this percentage to the difference between the 20th percentile value ($8 million) and 80th percentile ($35.0 million) value of size standards and then adding the result to the 20th percentile size standard value ($8.0 million) yields a calculated size standard value of $12.32 million ([{$35.0 million¥$8.0 million} * 0.159] + $8.0 million = $12.32 million). The final step is to round the calculated $12.32 million size standard to the nearest $500,000, which in this example yields $12.5 million. This procedure is applied to calculate size standards supported by other industry factors. Detailed formulas involved in these calculations are presented in SBA’s Methodology, which is available on its website at www.sba.gov/size. Derivation of Size Standards Based on Federal Contracting Factor Besides industry structure, SBA also evaluates Federal contracting data to assess the success of small businesses in getting Federal contracts under the existing size standards. For each industry with $20 million or more in annual Federal contract dollars, SBA evaluates the small business share of total Federal contract dollars relative to the small business share of total industry receipts. All other factors being equal, if the share of Federal contracting dollars awarded to small businesses in an industry is significantly less than the small business share of that industry’s total receipts, a justification would exist for considering a size standard higher than the current size standard. Conversely, if the small business share of Federal contracting activity is near or above the small business share in total industry receipts, this will support the current size standard. SBA increases the existing size standards by certain percentages when the small business share of total industry receipts exceeds the small business share of total Federal contract dollars by 10 or more percentage points. Proposed percentage increases generally reflect receipts levels needed to bring the small business share of Federal contracts at par with the small business share of industry receipts. These proposed percentage increases for receipts-based size standards are given in Table 3, Proposed Adjustments to Size Standards Based on Federal Contracting Factor. TABLE 3—PROPOSED ADJUSTMENTS TO SIZE STANDARDS BASED ON FEDERAL CONTRACTING FACTOR Percentage difference between the small business shares of total Federal contract dollars in an industry and of total industry receipts Size standards jbell on DSKJLSW7X2PROD with PROPOSALS2 Receipts based standards <$15 million .............................................................. $15 million to <$25 million ....................................... $25 million to <$41.5 million .................................... For example, if an industry with the current size standard of $8.0 million had an average of $50 million in Federal contracting dollars, of which 15 percent went to small businesses, and if that small businesses accounted for 40 percent of total receipts of that industry, VerDate Sep<11>2014 20:01 Oct 01, 2020 Jkt 253001 >¥10% ¥10% to ¥30% No change ......................... No change ......................... No change ......................... Increase 30% .................... Increase 20% .................... Increase 15% .................... the small business share of total Federal contract dollars would be 25 percent less than the small business share of total industry receipts (40%¥15%). According to the above rule, the new size standard for the Federal contracting factor for that industry would be set by PO 00000 Frm 00007 Fmt 4701 Sfmt 4702 <¥30% Increase 60% Increase 40% Increase 25% multiplying the current $8.0 million standard by 1.3 (i.e., 30% increase) and then by rounding the result to the nearest $500,000, yielding a size standard of $10.5 million. SBA evaluated the small business share of total Federal contract dollars for fifty-six E:\FR\FM\02OCP2.SGM 02OCP2 62378 Federal Register / Vol. 85, No. 192 / Friday, October 2, 2020 / Proposed Rules (56) industries (including 23 in Sector 48–49, seven (7) in Sector 51, 12 in Sector 52, and 14 in Sector 53) covered by this proposed rule which had $20 million or more in average annual Federal contract dollars during fiscal years 2016–2018. The Federal contracting factor was significant (i.e., the difference between the small business share of total industry receipts and small business share of Federal contracting dollars was 10 percentage points or more) in eighteen (18) of these industries, prompting an upward adjustment of their existing size standards based on that factor. For the remaining 38 industries that averaged $20 million or more in average annual contract dollars, the Federal contracting factor was not significant, and the existing size standard was applied for that factor. Derivation of Overall Industry Size Standard The SBA’s Methodology presented above results in five separate size standards based on evaluation of the five primary factors (i.e., four industry factors and one Federal contracting factor). SBA typically derives an industry’s overall size standard by assigning equal weights to size standards supported by each of these five factors. However, if necessary, SBA’s Methodology would allow assigning different weights to some of these factors in response to its policy decisions and other considerations. For detailed calculations, see SBA’s Methodology, available at www.sba.gov/ size. Calculated Size Standards Based on Industry and Federal Contracting Factors Table 4, Size Standards Supported by Each Factor for Each Industry (Receipts), below, shows the results of analyses of industry and Federal contracting factors for each industry and subindustry (exception) covered by this proposed rule. NAICS industries in columns 2, 3, 4, 5, 6, 7, and 8 show two numbers. The upper number is the value for the industry or Federal contracting factor shown on the top of the column and the lower number is the size standard supported by that factor. Column 9 shows a calculated new size standard for each industry. This is the average of the size standards supported by each factor, rounded to the nearest $500,000 for non-agriculture industries and rounded to the nearest $250,000 for agriculture industries. Analytical details involved in the averaging procedure are described in SBA’s Methodology, which is available at www.sba.gov/size. For comparison with the calculated new size standards, the current size standards are in column 10 of Table 4. TABLE 4—SIZE STANDARDS SUPPORTED BY EACH FACTOR FOR EACH INDUSTRY (RECEIPTS) [Upper value = calculated factor, lower value = size standard supported] NAICS code NAICS industry title Type Simple average firm size ($ million) Weighted average firm size ($ million) Average assets size ($ million) Four-firm ratio (%) Gini coefficient Federal contract factor (%) Calculated size standard ($ million) Current size standard ($ million) (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) 36.8 30.5 1.8 6.0 14.5 13.0 41.8 34.5 26.1 22.0 3.9 6.0 11.1 10.5 .................. 0.803 29.5 0.717 14.0 0.827 33.5 0.882 41.5 0.791 27.0 0.733 16.5 0.822 32.5 .................. ¥8.2 16.5 .................. $22.0 $16.5 9.0 30.0 .................. 22.0 30.0 .................. 38.0 30.0 21.0 30.0 15.0 30.0 22.0 30.0 25.5 16.5 .................. .................. 15.0 30.0 ¥29.2 34.5 10.6 30.0 ¥23.7 20.0 .................. 41.5 16.5 56.1 41.5 .................. 0.858 39.0 0.811 30.5 0.817 32.0 0.781 25.0 0.759 21.5 0.823 33.0 0.701 11.0 0.730 16.0 0.787 26.5 0.833 34.5 0.737 17.5 0.763 22.0 49.1 16.5 .................. 28.5 16.5 33.0 16.5 .................. 28.0 16.5 .................. 13.0 16.5 .................. 12.5 16.5 ¥14.2 20.0 .................. 26.5 16.5 13.0 16.5 24.2 16.5 1.4 16.5 .................. 13.0 16.5 16.0 16.5 36.5 30.0 .................. 31.5 40.5 .................. 18.0 8.0 481219 Other Nonscheduled Air Transportation. 484110 General Freight Trucking, Local 484121 General Freight Trucking, LongDistance, Truckload. 484122 General Freight Trucking, LongDistance, Less Than Truckload. 484210 Used Household and Office Goods Moving. 484220 Specialized Freight (except Used Goods) Trucking, Local. 484230 Specialized Freight (except Used Goods) Trucking, Long-Distance. 485111 Mixed Mode Transit Systems ..... 485112 Commuter Rail Systems ............. 485113 Bus and Other Motor Vehicle Transit Systems. 485119 Other Urban Transit Systems ..... 485210 Interurban and Rural Bus Transportation. 485310 Taxi Service ................................ 485320 Limousine Service ....................... jbell on DSKJLSW7X2PROD with PROPOSALS2 485410 School and Employee Bus Transportation. 485510 Charter Bus Industry ................... 485991 Special Needs Transportation .... 485999 All Other Transit and Ground Passenger Transportation. 486210 Pipeline Transportation of Natural Gas. 486990 All Other Pipeline Transportation 487110 Scenic and Sightseeing Transportation, Land. VerDate Sep<11>2014 20:01 Oct 01, 2020 Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. Jkt 253001 PO 00000 $3.6 19.0 0.9 8.5 3.5 19.0 10.2 41.5 1.9 12.5 1.2 9.5 4.4 22.0 6.5 31.0 117.7 41.5 5.3 26.0 15.7 41.5 3.7 19.5 0.8 8.0 0.9 8.5 3.4 18.0 2.4 14.5 1.4 10.0 1.1 9.0 183.9 41.5 21.4 41.5 1.8 12.0 Frm 00008 $76.4 10.0 10.7 7.5 734.6 32.0 2,209.7 41.5 309.3 17.5 30.7 8.5 201.1 14.0 .................. .................. 323.4 18.0 157.6 12.5 120.3 11.5 20.6 8.0 29.5 8.5 834.1 35.0 28.1 8.5 42.0 9.0 28.8 8.5 1,264.9 41.5 80.7 10.0 36.7 8.5 Fmt 4701 $2.2 18.5 0.3 8.0 1.6 15.0 4.9 33.5 0.7 10.0 0.5 9.0 2.3 19.0 3.6 26.0 65.4 41.5 3.0 22.5 8.7 41.5 3.1 23.0 0.3 8.0 0.4 8.0 2.2 18.5 1.9 16.5 0.5 9.0 0.5 9.0 73.6 41.5 8.6 41.5 1.1 12.0 Sfmt 4702 51.5 41.5 11.8 11.0 12.1 11.0 41.4 34.5 14.3 13.0 15.0 13.5 22.9 20.0 34.5 29.0 93.0 41.5 32.1 27.0 E:\FR\FM\02OCP2.SGM 02OCP2 62379 Federal Register / Vol. 85, No. 192 / Friday, October 2, 2020 / Proposed Rules TABLE 4—SIZE STANDARDS SUPPORTED BY EACH FACTOR FOR EACH INDUSTRY (RECEIPTS)—Continued [Upper value = calculated factor, lower value = size standard supported] NAICS code NAICS industry title Type Simple average firm size ($ million) Weighted average firm size ($ million) Average assets size ($ million) Four-firm ratio (%) Gini coefficient Federal contract factor (%) Calculated size standard ($ million) Current size standard ($ million) (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) 487210 Scenic and Sightseeing Transportation, Water. 487990 Scenic and Sightseeing Transportation, Other. 488111 Air Traffic Control ........................ Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std ... 0.9 8.5 2.5 15.0 20.5 41.5 5.5 27.0 5.3 26.0 9.7 41.5 8.2 37.5 34.2 41.5 4.4 22.5 2.7 15.5 0.6 7.0 1.8 12.0 3.4 18.0 NA NA 18.8 8.0 30.0 8.5 64.0 9.5 129.3 11.5 273.2 16.5 159.1 12.5 230.4 15.0 680.6 30.0 68.4 9.5 41.4 8.5 4.7 7.5 55.8 9.0 254.1 16.0 NA NA 0.7 10.0 1.5 14.5 12.8 41.5 3.5 25.5 2.9 22.5 5.7 37.5 9.1 41.5 34.2 41.5 3.6 26.5 2.1 17.5 0.3 7.5 0.8 10.5 0.8 10.5 NA NA 16.4 14.5 44.1 36.5 90.7 41.5 22.6 19.5 18.7 16.5 29.8 25.0 56.1 41.5 49.1 40.0 22.6 19.5 23.0 20.0 4.1 6.0 24.9 21.5 11.0 10.5 NA NA 0.735 17.0 0.781 25.5 0.691 9.0 0.798 28.5 0.839 36.0 0.807 30.0 0.850 38.0 0.837 35.5 0.806 30.0 0.791 27.0 0.620 6.0 0.794 27.5 0.787 26.5 NA NA Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. 1.5 11.0 13.2 41.5 NA NA 22.5 8.0 48.2 9.0 NA NA 0.6 9.0 4.7 32.5 NA NA 15.8 14.0 .................. 0.752 20.0 .................. NA NA NA NA Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. 0.8 8.0 3.5 19.0 6.4 30.5 2.1 13.0 4.9 24.5 29.1 41.5 4.6 23.0 4.5 22.5 7.0 33.0 0.5 6.5 2.2 13.5 2.8 16.0 0.6 7.0 1.3 10.0 11.8 41.5 4.2 21.5 53.4 41.5 154.7 41.5 15.8 41.5 22.4 8.0 444.9 22.0 237.4 15.5 13.5 8.0 592.7 27.0 11,979.9 41.5 3,814.6 41.5 107.2 11.0 1,303.2 41.5 2.8 7.5 110.7 11.0 86.7 10.0 7.9 7.5 38.4 8.5 2,274.1 41.5 1,018.6 41.5 3,348.2 41.5 7,147.3 41.5 753.3 32.5 0.2 7.5 2.1 17.5 7.1 41.5 1.2 12.5 2.6 20.5 24.2 41.5 2.2 18.0 3.0 22.5 6.4 41.5 0.4 8.5 1.3 13.5 1.4 14.0 0.4 8.0 0.9 11.0 16.8 41.5 5.9 39.0 66.8 41.5 119.0 41.5 6.6 41.5 12.4 11.5 22.6 19.5 38.1 31.5 19.1 16.5 50.7 41.5 41.4 34.0 46.4 38.0 38.3 32.0 55.7 41.5 27.3 23.0 23.8 20.5 66.6 41.5 13.4 12.5 42.0 34.5 76.5 41.5 46.2 38.0 52.0 41.5 58.9 41.5 48.1 39.5 0.725 15.0 0.842 36.5 0.798 28.5 0.723 14.5 0.867 41.0 0.871 41.5 0.865 40.5 0.814 31.5 0.848 37.5 0.604 6.0 0.817 32.0 0.815 31.5 0.696 10.0 0.777 24.5 0.873 41.5 0.834 35.0 0.879 41.5 0.894 41.5 0.865 40.5 488119 Other Airport Operations ............. 488190 Other Support Activities for Air Transportation. 488210 Support Activities for Rail Transportation. 488310 Port and Harbor Operations ....... 488320 Marine Cargo Handling ............... 488330 ping. 488390 Water 488410 Navigational Services to ShipOther Support Activities for Transportation. Motor Vehicle Towing ................. 488490 Other Support Activities for Road Transportation. 488510 Freight Transportation Arrangement. 488510 Exception, Non-Vessel Owning Common Carriers and Household Goods Forwarders. 488991 Packing and Crating ................... 488999 All Other Support Activities for Transportation. 491110 Postal Service (Necessary data not available to estimate the the factor and supported size standard). 492210 Local Messengers and Local Delivery. 493110 General Warehousing and Storage. 493120 Refrigerated Warehousing and Storage. 493130 Farm Product Warehousing and Storage. 493190 Other Warehousing and Storage 511210 Software Publishers .................... 512110 Motion Picture and Video Production. 512120 Motion Picture and Video Distribution. 512131 Motion Picture Theaters (except Drive-Ins). 512132 Drive-In Motion Picture Theaters jbell on DSKJLSW7X2PROD with PROPOSALS2 512191 Teleproduction and Other Postproduction Services. 512199 Other Motion Picture and Video Industries. 512240 Sound Recording Studios ........... 512290 tries. 515111 Other Sound Recording Indus- 515112 Radio Stations ............................. 515120 Television Broadcasting .............. Radio Networks ........................... 515210 Cable and Other Subscription Programming. 517410 Satellite Telecommunications ..... VerDate Sep<11>2014 20:01 Oct 01, 2020 Jkt 253001 PO 00000 Frm 00009 Fmt 4701 Sfmt 4702 E:\FR\FM\02OCP2.SGM .................. 12.5 8.0 .................. 22.0 8.0 0.1 35.0 ¥1.0 35.0 ¥21.3 40.5 .................. 30.5 35.0 25.5 35.0 27.5 35.0 30.0 16.5 21.3 41.5 ¥7.4 41.5 ¥32.6 41.5 ¥19.9 41.5 .................. 38.0 41.5 39.0 41.5 26.5 41.5 23.5 41.5 7.0 8.0 ¥16.3 10.5 ¥39.0 23.0 .................. 16.0 8.0 17.5 16.5 30.0 30.0 ¥22.1 34.5 0.5 8.0 .................. 17.5 30.0 22.0 8.0 8.0 8.0 .................. 10.5 30.0 21.3 30.0 ¥17.6 34.5 .................. 25.0 30.0 32.0 30.0 13.5 30.0 14.1 30.0 17.9 41.5 75.4 35.0 .................. 32.0 30.0 40.0 41.5 33.0 35.0 26.0 34.5 .................. 39.5 41.5 .................. 11.0 8.0 .................. 19.5 34.5 .................. 25.0 22.0 .................. 9.5 8.0 .................. 20.0 12.0 .................. 41.5 35.0 .................. 36.0 41.5 .................. 41.5 41.5 .................. 41.5 41.5 1.5 35.0 38.5 35.0 02OCP2 62380 Federal Register / Vol. 85, No. 192 / Friday, October 2, 2020 / Proposed Rules TABLE 4—SIZE STANDARDS SUPPORTED BY EACH FACTOR FOR EACH INDUSTRY (RECEIPTS)—Continued [Upper value = calculated factor, lower value = size standard supported] NAICS code NAICS industry title Type Simple average firm size ($ million) Weighted average firm size ($ million) Average assets size ($ million) Four-firm ratio (%) Gini coefficient Federal contract factor (%) Calculated size standard ($ million) Current size standard ($ million) (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) 39.5 32.5 15.9 14.0 59.5 41.5 34.1 28.5 43.0 35.5 33.6 28.0 52.3 41.5 43.7 36.0 46.9 38.5 .................. 0.869 41.5 0.849 37.5 0.859 39.5 0.803 29.5 0.846 37.0 0.885 41.5 0.873 41.5 0.869 41.5 0.806 30.0 .................. ¥3.9 35.0 8.2 35.0 .................. .................. 517919 All Other Telecommunications .... 518210 Data Processing, Hosting, and Related Services. 519110 News Syndicates ........................ 519120 Libraries and Archives ................ 519190 All Other Information Services .... 522220 Sales Financing .......................... 522291 Consumer Lending ...................... 522292 Real Estate Credit ....................... 522293 International Trade Financing ..... 522294 Secondary Market Financing ...... 522298 All Other Nondepository Credit Intermediation. 522310 Mortgage and Nonmortgage Loan Brokers. 522320 Financial Transactions Processing, Reserve, and Clearinghouse Activities. 522390 Other Activities Related to Credit Intermediation. 523110 Investment Banking and Securities Dealing. 523120 Securities Brokerage ................... 523130 Commodity Contracts Dealing .... 523140 Commodity Contracts Brokerage 523210 Securities and Commodity Exchanges. 523910 Miscellaneous Intermediation ..... 523920 Portfolio Management ................. 523930 Investment Advice ....................... 523991 Trust, Fiduciary, and Custody Activities. 523999 Miscellaneous Financial Investment Activities. 524113 Direct Life Insurance Carriers ..... 524114 Direct Health and Medical Insurance Carriers. 524127 Direct Title Insurance Carriers .... 524128 Other Direct Insurance (except Life, Health, and Medical) Carriers. 524130 Reinsurance Carriers .................. jbell on DSKJLSW7X2PROD with PROPOSALS2 524210 Insurance Agencies and Brokerages. 524291 Claims Adjusting ......................... 524292 Third Party Administration of Insurance and Pension Funds. 524298 All Other Insurance Related Activities. 525110, Pension Funds, 525120, Health and Welfare Funds, and 525190, Other Insurance Funds, and 525920, Trusts, Estates, and Agency Accounts. 525910 Open-End Investment Funds ...... 525990 Other Financial Vehicles ............. VerDate Sep<11>2014 20:01 Oct 01, 2020 Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. 6.8 32.0 10.9 41.5 7.7 35.5 1.1 9.0 2.9 16.5 34.7 41.5 9.7 41.5 28.9 41.5 3.7 19.5 2,094.2 41.5 6.0 29.0 1.1 9.0 21.3 41.5 764.1 33.0 1,122.5 41.5 263.9 16.0 88.8 10.5 117.8 11.5 3,705.1 41.5 2,845.5 41.5 8,476.2 41.5 44.4 9.0 .................. 44.5 9.0 2,801.2 41.5 3.1 23.5 5.5 36.5 2.6 21.0 0.4 8.0 1.1 12.5 115.7 41.5 32.2 41.5 57.7 41.5 7.3 41.5 4,188.4 41.5 30.0 41.5 1.9 16.5 14.2 41.5 Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. 3.1 17.0 41.2 41.5 13.3 41.5 11.5 41.5 4.7 23.5 692.4 41.5 2.4 14.5 9.2 41.5 2.3 14.0 8.7 39.5 12.1 41.5 813.7 41.5 866.5 41.5 16.3 41.5 26.0 41.5 363.4 41.5 0.9 8.0 1.7 11.5 48.1 41.5 3.2 17.5 2.7 16.0 239.2 15.5 7,592.5 41.5 5,432.2 41.5 314.6 18.0 366.7 19.5 2,097.6 41.5 332.7 18.5 1,893.2 41.5 847.8 35.5 2,183.6 41.5 1,063.7 41.5 19,613.2 41.5 28,836.1 41.5 3,552.3 41.5 813.3 34.5 3,744.8 41.5 488.3 23.5 119.8 11.5 34,890.1 41.5 411.0 21.0 216.2 14.5 Factor ....... Size Std. .. Factor ....... Size Std. .. 2.6 15.5 2.8 16.0 24.5 8.0 244.0 15.5 Jkt 253001 PO 00000 Frm 00010 .................. Fmt 4701 33.0 35.0 33.0 35.0 32.0 30.0 9.3 16.5 ¥25.8 34.5 .................. 18.5 16.5 26.5 30.0 38.0 41.5 .................. 41.5 41.5 .................. 40.0 41.5 .................. 31.0 41.5 .................. 41.5 41.5 .................. .................. 35.5 41.5 11.0 10.5 37.0 31.0 0.742 18.0 0.886 41.5 ¥10.5 10.5 0.8 41.5 13.0 8.0 39.5 41.5 3.8 27.5 29.4 41.5 5.5 37.0 4.1 29.0 1.2 13.0 314.7 41.5 12.1 41.5 7.6 41.5 0.9 11.0 9.6 41.5 20.2 41.5 1,162.4 41.5 393.9 41.5 8.6 41.5 52.1 41.5 403.7 41.5 0.5 9.0 0.6 9.5 28.3 41.5 2.1 18.0 13.8 41.5 18.1 16.0 46.7 38.5 33.9 28.5 35.9 30.0 40.1 33.0 84.8 41.5 19.4 17.0 13.0 12.0 29.2 24.5 58.7 41.5 63.5 41.5 29.1 24.5 34.4 28.5 89.4 41.5 43.1 35.5 49.4 40.5 11.2 10.5 21.8 19.0 76.3 41.5 49.2 40.5 .................. 0.854 38.5 0.891 41.5 0.886 41.5 0.872 41.5 0.851 38.0 0.683 7.5 0.827 33.5 0.868 41.0 0.842 36.5 0.873 41.5 0.884 41.5 0.887 41.5 0.866 40.5 0.888 41.5 0.877 41.5 0.831 34.5 0.735 17.0 0.812 31.0 0.886 41.5 0.848 37.5 0.8612 40.0 ¥16.0 26.5 1.1 41.5 .................. 25.0 22.0 41.0 41.5 37.0 41.5 .................. 32.5 41.5 .................. 26.5 41.5 .................. 33.0 41.5 .................. 27.0 41.5 12.9 41.5 ¥20.8 41.5 1.4 41.5 23.7 41.5 .................. 35.5 41.5 27.5 41.5 41.5 41.5 41.5 41.5 37.5 41.5 3.1 41.5 .................. 38.5 41.5 41.5 41.5 .................. 39.0 41.5 .................. 39.5 41.5 ¥45.1 13.0 .................. 13.0 8.0 18.0 22.0 58.1 35.0 ¥14.7 20.0 .................. 40.0 35.0 27.0 16.5 32.5 35.0 13.2 41.5 13.9 41.5 58.2 41.5 .................. 0.807 30.0 0.865 40.5 .................. 31.5 35.0 .................. 32.5 35.0 Sfmt 4702 E:\FR\FM\02OCP2.SGM 02OCP2 62381 Federal Register / Vol. 85, No. 192 / Friday, October 2, 2020 / Proposed Rules TABLE 4—SIZE STANDARDS SUPPORTED BY EACH FACTOR FOR EACH INDUSTRY (RECEIPTS)—Continued [Upper value = calculated factor, lower value = size standard supported] NAICS code NAICS industry title Type Simple average firm size ($ million) Weighted average firm size ($ million) Average assets size ($ million) Four-firm ratio (%) Gini coefficient Federal contract factor (%) Calculated size standard ($ million) Current size standard ($ million) (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) 531110 Lessors of Residential Buildings and Dwellings. 531120 Lessors of Nonresidential Buildings (except Miniwarehouses). 531130 Lessors of Miniwarehouses and Self-Storage Units. 531190 Lessors of Other Real Estate Property. Exception to 531110,531120,531130, and 531190—Review footnote #9. 531210 Offices of Real Estate Agents and Brokers. 531311 Residential Property Managers .. Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. 1.7 11.5 3.1 17.0 0.8 8.0 0.9 8.0 45.1 41.5 0.9 8.0 1.0 9.0 1.0 9.0 0.4 6.5 0.8 8.0 13.3 41.5 16.8 41.5 9.2 41.5 333.6 18.5 691.1 30.5 413.7 21.0 84.1 10.0 1,172.4 41.5 398.6 20.5 44.2 9.0 28.0 8.5 33.1 8.5 95.8 10.5 7,875.5 41.5 830.6 35.0 1,781.6 41.5 8.5 41.5 31.1 41.5 4.2 29.0 4.4 30.5 297.9 41.5 0.4 8.0 1.1 12.5 5.2 35.0 0.1 6.5 4.1 29.0 19.0 41.5 56.0 41.5 15.3 41.5 9.3 9.0 11.5 11.0 33.7 28.0 18.0 16.0 47.5 39.0 13.3 12.0 4.7 6.0 5.9 6.5 12.4 11.5 15.6 14.0 90.1 41.5 62.4 41.5 62.6 41.5 0.765 22.5 0.825 33.5 0.698 10.5 0.689 8.5 0.862 40.0 0.758 21.0 0.756 20.5 0.732 16.5 0.695 9.5 0.764 22.5 0.889 41.5 0.873 41.5 0.869 41.0 Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. Factor ....... Size Std. .. 10.7 41.5 0.6 7.0 2.3 14.0 7.6 35.0 0.5 6.5 1.1 9.0 0.9 8.5 18.8 41.5 2,040.5 41.5 12.0 8.0 1,168.7 41.5 851.4 35.5 4.7 7.5 34.1 8.5 6.3 7.5 2,011.1 41.5 5.9 39.0 0.3 8.0 1.2 13.0 4.7 32.5 0.2 7.5 0.6 9.5 0.7 9.5 46.9 41.5 80.1 41.5 24.9 21.5 86.1 41.5 65.5 41.5 10.0 9.5 15.1 13.5 6.9 7.0 61.4 41.5 0.866 40.5 0.714 13.0 0.865 40.5 0.830 34.5 0.632 6.0 0.708 12.0 0.610 6.0 0.882 41.5 Factor ....... Size Std. .. 7.8 36.5 655.5 29.0 9.8 41.5 32.8 27.5 Factor ....... Size Std. .. Factor ....... Size Std. .. 4.7 23.5 5.3 26.0 109.7 11.0 372.8 20.0 6.7 41.5 6.6 41.5 Factor ....... Size Std. .. 14.0 41.5 795.5 34.0 28.0 41.5 531312 Nonresidential Property Managers. 531320 Offices of Real Estate Appraisers 531390 Other Activities Related to Real Estate. 532111 Passenger Car Rental ................ 532112 Passenger Car Leasing .............. 532120 Truck, Utility Trailer, and RV (Recreational Vehicle) Rental and Leasing. 532210 Consumer Electronics and Appliances Rental. 532281 Formal Wear and Costume Rental. 532282 Video Tape and Disc Rental ....... 532283 Home Health Equipment Rental 532284 Recreational Goods Rental ......... 532289 al. 532310 All Other Consumer Goods RentGeneral Rental Centers .............. jbell on DSKJLSW7X2PROD with PROPOSALS2 532411 Commercial Air, Rail, and Water Transportation Equipment Rental and Leasing. 532412 Construction, Mining, and Forestry Machinery and Equipment Rental and Leasing. 532420 Office Machinery and Equipment Rental and Leasing. 532490 Other Commercial and Industrial Machinery and Equipment Rental and Leasing. 533110 Lessors of Nonfinancial Intangible Assets (except Copyrighted Works). Evaluation of Size Standards for Subindustry Categories or ‘‘Exceptions’’ of that analysis are discussed in the following two subsections. In accordance with SBA’s approach to evaluating size standards for subindustry categories (or ‘‘exceptions’’), SBA has evaluated the two (2) exceptions covered by this rule using the procedures described in the revised SBA’s Methodology. The results Non-Vessel Owning Common Carriers and Household Goods Forwarders VerDate Sep<11>2014 20:01 Oct 01, 2020 Jkt 253001 ¥3.8 30.0 ¥6.2 30.0 .................. 23.5 30.0 28.0 30.0 20.5 30.0 .................. 16.0 30.0 60.3 41.5 ¥11.1 10.5 28.3 8.0 .................. 40.5 41.5 13.0 8.0 11.0 8.0 17.0 8.0 26.4 8.0 ¥12.5 10.5 ¥0.9 41.5 0.2 41.5 58.8 41.5 8.5 8.0 17.0 8.0 41.5 41.5 41.0 41.5 41.5 41.5 .................. 40.5 41.5 .................. 12.5 22.0 .................. 31.0 30.0 15.5 35.0 .................. 36.0 35.0 7.5 8.0 .................. 11.0 8.0 .................. 7.5 8.0 33.4 35.0 40.0 35.0 0.824 33.0 3.3 35.0 34.0 35.0 40.0 33.0 21.0 18.0 0.832 34.5 0.822 33.0 28.6 35.0 18.2 35.0 32.5 35.0 30.0 35.0 23.0 20.0 0.867 41.0 .................. 35.0 41.5 Non-Vessel Owning Common Carriers and Household Good Forwarders is an ‘‘exception’’ or subindustry under NAICS 488510 (Freight Transportation Arrangement), with the size standard of $30.0 million in average annual PO 00000 Frm 00011 Fmt 4701 Sfmt 4702 receipts. The data that SBA receives from the Census Bureau’s tabulation are limited to the 6-digit NAICS industry level and therefore do not provide information on economic characteristics of firms at the sub-industry level. Thus, for reviewing or modifying size standards at the subindustry levels (‘‘exceptions’’), SBA normally evaluates data from FPDS–NG and SAM using a two-step procedure. E:\FR\FM\02OCP2.SGM 02OCP2 62382 Federal Register / Vol. 85, No. 192 / Friday, October 2, 2020 / Proposed Rules First, using FPDS–NG, SBA identifies Product Service Codes (PSCs) that correspond to specific exceptions. SBA then identifies firms that have received federal contracts under those PSCs and evaluates their receipts and employee data from SAM and FPDS–NG to derive the values for industry and federal contracting factors. Contracting activity for NAICS 488510 including the exception is distributed over roughly 70 different PSCs. Using FPDS–NG data for fiscal years 2016– 2018, SBA identified 5 primary PSCs that correspond to the overall industry including the exception, that amount to 95.6 percent of total dollars obligated on NAICS 488510. These PSCs are V119 (Transportation/Travel/RelocationTransportation: Other), W023 (LeaseRent of Vehicles-Trailers-CYC), M1GZ (Operation of Other Warehouse Buildings), V112 (Transportation/ Travel/Relocation-Transportation: Motor Freight) and R706 (SupportManagement: Logistics Support). The top PSC alone, V119, accounts for 70 percent of total dollars obligated. Table 5, Primary PSCs of NAICS 488510 and Average Dollars Obligated—Fiscal Years 2016–2018, below identifies these five (5) PSCs and their average total dollars obligated for the fiscal years 2016–2018. SBA analyzed the contracting activity under these PSCs, but the Agency was unable to reliably differentiate the level of activity corresponding to the exception versus the overall industry, and to identify any PSCs that would correspond uniquely to the exception. TABLE 5—PRIMARY PSCS OF NAICS 488510 AND AVERAGE TOTAL DOLLARS OBLIGATED FISCAL YEARS 2016–2018 Percentage of dollars obligated to primary PSCs Cumulative percentage of total NAICS 488510 $126.76 32.17 7.96 3.14 2.62 70.2 17.8 4.4 1.7 1.5 70.2 88.0 92.4 94.1 95.6 180.64 100.0 ........................ Dollars obligated ($ million) PSC PSC description V119 ............... W023 .............. M1GZ ............. V112 ............... R706 ............... Transportation/Travel/Relocation-Transportation: Other ................................. Lease-Rent of Vehicles Trailers-CYC ............................................................. Operation of Other Warehouse Buildings ....................................................... Transportation/Travel/Relocation-Transportation: Motor Freight .................... Support Management: Logistics Support ........................................................ Total ........ .......................................................................................................................... Source: FPDS–NG. SBA also reviewed the distribution of contracts awarded to small and other than small businesses in the overall industry. SBA found that only about $2 million or 1.1% of the $189.9 Million obligated to the overall industry went to small businesses. Thus, while the total contracting dollars obligated to all firms in the industry is significant, the total dollars obligated to small firms is not. Additionally, the top agencies using the NAICS code 488510, USTRANSCOM and Federal Emergency Management Agency, which account for 91.3 percent of total dollars obligated during the period evaluated, have no small business dollars. In an effort to differentiate the exception from the overall industry and determine its economic characteristics, SBA evaluated 2012 Economic Census sub-industry data found in the US Census American FactFinder. The data divide NAICS 488510 in two components identified with an additional digit. First, the 7-digit level NAICS 4885101 (Freight Forwarders), and second the 7-digit level NAICS 4885102 (Arrangement of transportation of freight and cargo). The NAICS 4885101 includes Non-vessel operating common carrier service as one of the principal activities. SBA understands that NAICS 4885101 corresponds to the activity classified as an exception to the General NAICS 6 digit 488510. The NAICS 4885101 includes multimodal activities supporting transportation, and the firms assume responsibility for delivery of the goods.1 SBA evaluated the economic characteristics of NAICS 4885101 to the overall industry and found them to be similar. Table 6, Industry Comparison NAICS 488510 and NAICS 4885101, displays a comparison of several economic factors between NAICS 488510 (overall industry) and NAICS 4885101 (industry exception). TABLE 6—INDUSTRY COMPARISON NAICS 488510 AND NAICS 4885101 Economic characteristic (factor) NAICS 488510 (overall industry) Average Firm Size by Total Receipts ($ millions) ....................................................................................... Average Firm Size by Number of Employees ............................................................................................. Weighted Average Firm Size by Total Receipts ($ millions) ...................................................................... Concentration Ratio of Top 4 Largest Firms by Total Receipts (CR4) % .................................................. Percentage of Small Firms (based on current size standards) (%) ............................................................ $3.4 16 $121.9 11.0% 88.1% NAICS 4885101 (exception) $4.0 17 $100.6 14.5% 85.6% jbell on DSKJLSW7X2PROD with PROPOSALS2 Source: U.S. Census Bureau, AmericanFactFinder and SBA calculations. Despite the similarities between the overall industry and the exception, SBA recognizes that there are important distinctions between freight forwarders and NVOCCs. For example, the Federal Maritime Commission defines a freight forwarder as a company that arranges cargo movement to an international destination, dispatches shipments from 1 The Census definition is: ‘‘This U.S. Census Bureau NAICS-based industry comprises establishments primarily engaged in undertaking the transportation of goods from shippers to receivers for a charge covering the entire transportation, and in turn making use of the services of various freight carriers in affecting delivery, paying transportation charges, and assuming responsibility for delivery of the goods. There is no relationship between shippers and the various freight carriers delivering the goods.’’ VerDate Sep<11>2014 20:01 Oct 01, 2020 Jkt 253001 PO 00000 Frm 00012 Fmt 4701 Sfmt 4702 E:\FR\FM\02OCP2.SGM 02OCP2 jbell on DSKJLSW7X2PROD with PROPOSALS2 Federal Register / Vol. 85, No. 192 / Friday, October 2, 2020 / Proposed Rules the United States via common carriers and books or otherwise arranges space for those shipments on behalf of shippers and prepares and processes the documentation and performs related activities pertaining to those shipments.’’ 2 Conversely, the Federal Maritime Commission defines an NVOCC as ‘‘a common carrier that holds itself out to the public to provide ocean transportation, issues its own house bill of lading or equivalent document, and does not operate the vessels by which ocean transportation is provided; a shipper in its relationship with the vessel-operating common carrier involved in the movement of cargo.’’ Thus, the distinction between freight forwarders and NVOCCs will be not on the activity or service provided, but in the level of responsibility and the type of revenue that counts for the firm. Product Service Codes within NAICS 488510 do not distinguish between agents or NVOCCs, so it is a challenge to choose a PSC code to evaluate the exception. Prior to 2000, the exception under NAICS 488510 did not exist. SBA did not recognize the differences between freight forwarders acting as agents (or brokers) and freight forwarders that are Non-Vessel Operating Common Carriers (NVOCCs) and Household Goods Forwarders, and applied a similar size to both ($18.5 million). On August 9, 2000, SBA adopted the differentiation between agents and NVOCCs (65 FR 48601). SBA assigned a smaller size standard of $5 million to the overall industry which included the activity of agents and a higher size standard of $18.5 million to the exception which included the activities of NVOCCs and Household Goods Forwarders. SBA’s justification for a lower size for the overall industry was that the revenues of freight forwarders, which typically act as agents or brokers, do not correspond to their intermediation activity whereas the revenues of NVOCCs, which typically act as wholesalers of cargo space, may have substantial expenses not usually incurred by agent or broker firms. Despite these distinctions, SBA’s preliminary analysis of industry structure suggests that firms in the exception and overall industry may be performing similar functions or that there may be significant overlap in the services offered by freight forwarders and NVOCCs. The absence of an easily identifiable PSC that is unique to the 2 See Federal Maritime Commission web page for definitions of Freight Forwarder and Non-Vessel Owning Common Carriers at: https://www.fmc.gov/ resources-services/ocean-transportationintermediaries/. VerDate Sep<11>2014 20:01 Oct 01, 2020 Jkt 253001 business activities of NVOCCs also supports this finding. Moreover, SBA’s analysis of contracting data found that contracting officers prefer to use the lower size standard of $16.5 million rather than the higher size standard of $30 million available for the exception. This suggests that agencies are able to obtain the services needed provided by the overall NAICS using the lower size standard applicable to NAICS 488510. For these reasons, SBA proposes to retain the sub-industry category (‘‘exception’’) under NAICS 488510 and its $30.0 Million size standard. SBA invites comments, along with supporting information, on this proposal as well as suggestions on whether the proposed size standard of $17.5 million for the overall industry is more appropriate for this exception. SBA also welcomes comments on the percent of Federal contracting dollars that correspond to NVOCCs versus the overall industry. Finally, SBA requests comments on available data sources that clearly define the economic characteristics of NVOCCs, and Household Goods Forwarders as well. Exception to NAICS Industry Group 5311: Leasing of Building Space to the Federal Government by Owners The current size standard for Federal contracts for Leasing of Building Space to Federal Government by Owners (‘‘exception’’ to NAICS industry group 5311 (531110, 531120, 531130, and 531190) is $41.5 million. This size standard applies only to certain Federal contracting opportunities that meet specific criteria. Footnote 9 of SBA’s table of size standards (13 CFR 121.201) reads: ‘‘For Government procurement, a size standard of $41.5 million in gross receipts applies to the owners of building space leased to the Federal Government. This size standard does not apply to an agent.’’ To determine if the current $41.5 million size standard is appropriate, SBA evaluated average firm size, market concentration, and size distribution of firms involved in Leasing of Building Space to Federal Government by Owners. SBA used data from FPDS–NG and SAM.gov and followed the procedure described under the section ‘‘Sources of Industry and Program Data’’ (above). Based on the data for fiscal years 2016–2018, Federal contracts awarded to NAICS 6 digit industries 531110, 531120, 531130 and 531190 averaged about $221.0 million annually, with the largest percentage going to NAICS 531120 (75.5 percent). SBA chose to analyze dollars awarded to product service codes (PSC) X111/ X1AA (Lease/Rental of Office Building), PO 00000 Frm 00013 Fmt 4701 Sfmt 4702 62383 X1FZ (Lease or rental of other residential buildings), and X179 (Lease or rent of other warehouse buildings) across the four NAICS industries within 5311. Dollars obligated to these three PSCs add to $130.1 million in average in fiscal years 2016–2018, which represents 58.9 percent of total dollars obligated to these NAICS 6-digit industries. The results, as shown in Table 4, support retaining the current size standard of $41.5 million. Evaluation of the Assets-Based Size Standard In 1984, SBA published a notice of policy allowing financial services that prime contractors procure from small minority owned and controlled financial institutions to qualify as subcontracts for purposes of meeting subcontracting goals and credits (see 49 FR 13091–01 (April 2, 1984)). Concurrently, SBA also published a proposed rule that a financial institution with total assets of not more than $100 million would be considered small (see 49 FR 13052–01 (April 2, 1984)). SBA adopted the $100 million in total assets as the size standard for financial institutions (see 49 FR 49398–01 (October 16, 1984)). Over time, the definition of small depository institution was extended to all financial institutions within NAICS 5221, Depository Credit Intermediation. Since then, along with other monetary-based size standards, SBA has periodically adjusted the assets-based size standard for inflation, with the latest adjustment increasing it to $600 million (see 84 FR 34261 (July 18, 2019)). Currently, the $600 million assetsbased size standard applies to four industries within NAICS Industry Group 5221, and one industry within NAICS Industry Group 5222, Nondepository Credit Intermediation. These include NAICS 522110 (Commercial Banking), NAICS 522120 (Savings Institutions), NAICS 522130 (Credit Unions), NAICS 522190 (Other Depository Credit Intermediation), and NAICS 522210 (Credit Card Issuing). Because only a small number of industries have assets-based size standards, no comparison groups could be developed to assess differing characteristics of individual industries based on total assets. Thus, most of the SBA’s size standards methodology is not applicable to analyzing the assets-based size standards for financial institutions. Consequently, in this proposed rule, SBA has examined the changes since 2011 (the year that the assets-based size standard was last reviewed) in other financial industry factors to assess whether the current $600 million assets- E:\FR\FM\02OCP2.SGM 02OCP2 62384 Federal Register / Vol. 85, No. 192 / Friday, October 2, 2020 / Proposed Rules based size standard should be modified to reflect today’s financial industry structure. Specifically, SBA evaluated changes from 2011 to 2018 (the latest year for which the financial institution data are available) in average firm size, industry concentration, and distribution of firms by size (i.e., Gini coefficient) for financial institutions. As it did in the Sector 52 proposed and final rules (see 77 FR 55737 (September 11, 2012) and 78 FR 37409 (June 20, 2013)) in the prior review, in this proposed rule, SBA both evaluated depository institutions as a whole and the minority owned and controlled depository institutions separately. SBA evaluated all depository institutions using SDI data. SDI does not provide the NAICS definition for every firm included in the database. However, it has a field called Asset Concentration Hierarchy, which can be used to identify each institution’s primary specialization in terms of asset concentration, such as credit card services. Another field, Bank Charter Class, identifies the institutions as banks or thrifts. SDI does not include data on Credit Unions (NAICS 522130). Because the data are not separated by NAICS code, and also the differences among services offered by different financial institutions (such as commercial banks, saving institutions, and credit card issuing companies) have greatly diminished over the recent decades, SBA has analyzed all financial institutions as one industry group. SBA identified Minority Depository Institutions using the list of minority depository institutions compiled by the Federal Depository Institutions (FDIC) (https://www.fdic.gov/regulations/ resources/minority/mdi.html). SBA examined their characteristics using the assets data from SDI database too fully capture the changes in industry structure of minority-owned financial institutions since 2011. The number of all depository institutions, total assets and calculated industry factors for 2011 and 2018 are shown on Table 7, Calculated Industry Factors for All Depository Institutions. All data were collected at the end of the corresponding calendar year. Similar calculations for the minority-owned depository institutions are shown on Table 8, Calculated Industry Factors for Minority Owned Depository Institutions. For comparability, all monetary values are expressed in 2018 dollars, using the Bureau of Economic Analysis (BEA) GDP deflator for 2018 (Source: BEA’s Table 1.1.4. Price Indexes for Gross Domestic Product, https://apps.bea.gov/iTable/iTable.cfm? reqid=19&step=2#reqid=19&step= 2&isuri=1&1921=survey). TABLE 7—CALCULATED INDUSTRY FACTORS FOR ALL DEPOSITORY INSTITUTIONS [All monetary values are in millions of 2018 dollars] Number of institutions Year 2011 ......................................................... 2018 ......................................................... 7,366 5,415 Total assets Simple average firm size $15,682,868.5 18,034,370.5 Weighted average firm size $2,129.1 3,330.4 $84,083.9 91,644.4 Four-firm ratio (%) Gini coefficient 41.0 39.4 0.907 0.911 Source: SDI/FDIC (https://www7.fdic.gov/sdi/download_large_list_outside.asp). Data correspond to Fourth quarter of calendar year 2018 and deflated using GDP deflator). TABLE 8—CALCULATED INDUSTRY FACTORS FOR MINORITY DEPOSITORY INSTITUTIONS [All monetary values are in millions of 2018 dollars] Number of institutions Year 2011 ......................................................... 2018 ......................................................... 187 149 Total assets Simple average firm size $204,192.6 233,929.0 Weighted average firm size $1,091.9 1,570.0 $9,923.4 14,024.3 Four-firm ratio (%) Gini coefficient 40.6 47.5 0.782 0.776 jbell on DSKJLSW7X2PROD with PROPOSALS2 Source: FRB and FDIC (table https://www.fdic.gov/regulations/resources/minority/mdi-history.xlsx). During the 2011 to 2018 span, as shown on Table 7, above, the financial industry continued to show a decrease in the total number of depository institutions in 2018 as compared to 2011. The total number of all financial depository institutions decreased by 26.5 percent from 7,366 in 2011 to 5,415 in 2018, while their total assets (measured in 2018 dollars) increased by 15.0 percent during the same period. The average firm size (measured in total assets) also increased from 2011 to 2018, with their simple average firm size increasing by a factor of 1.56 and the weighted average firm size increasing by a factor of 1.09. The four largest institutions’ share of total assets (also referred to as four-firm concentration ratio or CR4) slightly decreased (from VerDate Sep<11>2014 20:01 Oct 01, 2020 Jkt 253001 41.0% to 39.4%), but the Gini coefficient value slightly increased from 0.907 in 2011 to 0.911 in 2018. Overall, the values of these factors confirm an increase over time in average size of the depository institutions, and an increase in concentration. The average firm size and Gini coefficient value for the minority owned banks on Table 8 also confirmed the continuation of the trend of increased concentration in the financial industry, even more than for the total industry as reflected on Table 7. For example, the four firm concentration ratio for minority depository institutions increased from 40.6 in 2011 to 47.5 in 2018. This is an increase by a factor of 1.17, although the Gini coefficient decreased slightly. PO 00000 Frm 00014 Fmt 4701 Sfmt 4702 For the five assets-based industries listed above, Federal contracting dollars averaged about $130 million per year during fiscal years 2016–2018. This reflects a large increase in dollars awarded to those industries when compared to fiscal years 2008–2010, when the average total dollars obligated to them was about $22 million. Of those five industries, NAICS 522110, Commercial Banking, accounts for 99.6 percent of the average total dollars obligated. Thus, under SBA’s methodology, different than the first comprehensive review, Federal contracting is a significant factor for reviewing the assets-based size standard for the industries. The current structure of the financial industry relative to that for 2011, as E:\FR\FM\02OCP2.SGM 02OCP2 62385 Federal Register / Vol. 85, No. 192 / Friday, October 2, 2020 / Proposed Rules discussed above, strongly supports increasing the current $600 million assets-based size standard. The changes in industry factors for all financial institutions on Table 7 as well as the results for the minority-owned institutions in Table 8 support a size standard in the range of $700 million to $1 billion in total assets. SBA is proposing $750 million as it would include about 81 percent of the financial institutions and 5.3 percent of total assets of all financial institutions as compared to 77.3 percent of institutions and about 4.6 percent of total assets under the current $600 million. Similarly, it would include about 75.2 percent of institutions and 12.08 percent of the total assets of all minority owned institutions, as compared to 71.4 percent of institutions and 10.4 percent of total assets under the current $600 million. The proposed $750 million assetsbased size standard would apply to the following four industries within NAICS Subsector 522, Credit Intermediation and Related Activities: NAICS 522110 (Commercial Banking), NAICS 522120 (Savings Institutions), NAICS 522190 (Other depository Credit Intermediation), and NAICS 522210 (Credit Card Issuing). NAICS 522130, Credit Unions A credit union is a cooperative, notfor-profit financial institution owned and controlled by its members. Credit unions are established and operated for the purpose of promoting thrift and providing credit at competitive rates and other financial services to their membership. Generally, they could be corporate credit unions, Federal, or State credit unions. Because this industry includes only not-for-profit institutions, SBA does not consider them small business concerns for Federal government assistance. The small business regulations state that a business concern eligible for assistance from SBA as a small business is a business entity organized for profit, with a place of business located in the United States (see 13 CFR 121.05(a)(1)). However, SBA determines size standard for this industry because it is useful for other purposes, such as rulemaking. Table 9, Calculated Industry Factors for Credit Unions, provides the calculated factors for Credit Unions. Between 2011 and 2018, the total number of concerns diminished by 24 percent, but at the same time the total assets increased by a factor of 1.34. The simple average almost doubled (1.77) between 2011 and 2018 in real terms, and the weighted average grew by a factor of more than 1.5. The four firm concentration ratio increased by a factor of 1.24. Gini coefficient did not change significantly during the period. All these factors support an increase of size standard for Credit Unions and SBA proposes $750 million as well. With this size standard, the percentage of small firms will increase to 92.8 percent compared to 91.2 percent with the current $600 million size standard. Similarly, the share of small business assets will increase to about 30 percent from 25.7 percent. TABLE 9—CALCULATED INDUSTRY FACTORS FOR CREDIT UNIONS [All monetary values are in millions of 2018 dollars] Number of institutions Year 2011 ......................................................... 2018 ......................................................... 7,240 5,492 Total assets Simple average firm size $1,096,069.7 1,470,839.4 Weighted average firm size $151.4 267.8 $3,720.2 5,687.5 Four-firm ratio (%) 9.8 12.2 Gini coefficient 0.828 0.833 Source: NCUA,https://www.ncua.gov/analysis/credit-union-corporate-call-report-data/quarterly-dat. jbell on DSKJLSW7X2PROD with PROPOSALS2 Special Considerations NAICS Subsector 525, Funds, Trusts and Other Financial Vehicles As noted earlier, the 2012 Economic Census special tabulation includes data only for two NAICS codes within NAICS Subsector 525: NAICS 525910, Open-End Investment Funds, and NAICS 525990, Other Financial Vehicles. Because all industries in that Subsector currently share the same $35.0 million receipts-based size standard, SBA applies the results based on data for NAICS 525910 and 525990, as shown in Table 4 (above), to all remaining industries within this Subsector and initially proposes the same common size standard of $32.5 million in average annual receipts for all six industries in Subsector 525. While that represents a slight decrease from the current $35.0 million level, this would have virtually no impacts on the number of small firms nor on the VerDate Sep<11>2014 20:01 Oct 01, 2020 Jkt 253001 amount of Federal contract dollars awarded to small firms under the current size standards. However, while lowering size standards would cause no or very little impact on small businesses in those industries, in response to the COVID–19 emergency and its impacts on small businesses and the overall economy, SBA is proposing to maintain the size standards for those industries at their current levels. SBA seeks comments on this proposal as well as suggestion on alternative data sources, if any, to evaluate those industries. NAICS 524126, Direct Property and Causality Insurance Carriers The current size standard for NAICS 524126, Direct Property and Causality Insurance, is 1,500 employees, which SBA has not reviewed in this proposed rule. SBA will review this size standard together with other employee-based size standards at a later date. Until then, SBA proposes to retain the current PO 00000 Frm 00015 Fmt 4701 Sfmt 4702 1,500-employee size standard for NAICS 524126. Summary of Calculated Size Standards Of the one hundred-twenty four (124) industries and two (2) subindustries (exceptions) reviewed in this proposed rule, the results from analyses of the latest available data on the five primary factors from Table 4, Size Standards Supported by Each Factor for Each Industry (millions of dollars), above, would support increasing size standards for forty five (45) industries, decreasing size standards for sixty-nine (69) industries, and retaining size standards for 9 industries and 2 subindustries. Additionally, SBA retained the size standard for one industry that the Economic Census does not cover. Table 10, Summary of Calculated Size Standards, summarizes these results by NAICS sector. E:\FR\FM\02OCP2.SGM 02OCP2 62386 Federal Register / Vol. 85, No. 192 / Friday, October 2, 2020 / Proposed Rules TABLE 10—SUMMARY OF CALCULATED SIZE STANDARDS Number of size standards reviewed Number of size standards increased Number of size standards decreased Number of size standards unchanged NAICS sector Sector name 48–49 .............. 51 .................... 52 .................... 53 .................... Transportation and Warehousing ....................... Information .......................................................... Finance and Insurance ....................................... Real Estate and Rental and Leasing * ............... 43 19 39 25 18 8 * 10 9 23 9 24 13 2 2 5 3 All Sectors ............................................................................. 126 45 69 12 * Includes five assets-based size industries. On March 13, 2020, the ongoing Coronavirus Disease 2019 (COVID–19) was declared a pandemic of enough severity and magnitude to warrant an emergency declaration for all states, territories, and the District of Columbia. With the COVID–19 emergency, many small businesses nationwide are experiencing economic hardship as a direct result of the Federal, State, and local public health measures that are being taken to minimize the public’s exposure to the virus. These measures, some of which are governmentmandated, are being implemented nationwide and include the closures of restaurants, bars, and gyms. In addition, based on the advice of public health officials, other measures, such as keeping a safe distance from others or even stay-at-home orders, are being implemented, resulting in a dramatic decrease in economic activity as the public avoids malls, retail stores, and other businesses. The Coronavirus Aid, Relief, and Economic Security Act (the CARES Act or the Act) (Pub. L. 116–136) was enacted on March 27, 2020, to provide emergency assistance and health care response for individuals, families, and businesses affected by the coronavirus pandemic. Section 1102 of the Act temporarily permits SBA to guarantee 100 percent of 7(a) loans under a new program titled the Paycheck Protection Program (PPP). Section 1106 of the Act provides for forgiveness of up to the full principal amount of qualifying loans guaranteed under the PPP. The PPP and loan forgiveness are intended to provide economic relief to small businesses nationwide adversely impacted under the COVID–19. On April 24, 2020, additional funding for the CARES Act, including for the PPP, was provided. The Agency is following closely the development of the pandemic and the economic situation and recovery. The consequence of the initial response of the public to the COVID–19 pandemic as well as the different measures taken by the Government to contain it (e.g. stay at home orders, social distancing, etc.) have resulted in the present economic decline. A variety of economic indicators such as the Gross Domestic Product (GDP) and the unemployment rate shows that this recession is significantly worse than any other recession since World War II. The GDP decreased nearly 5 percent, and the Personal consumption in goods and services decreased 6.8 percent in the first quarter of 2020; in May 2020, personal income decreased 4.2 percent and the unemployment rate increased from 3.5 percent in February 2020 to 11.1 percent in June 2020, and also for the month of June 2020, Non-farm payroll decreased by 15 million since February 2020. Specifically for the sectors evaluated in this proposed rule, more recent data in June 2020 shows that the unemployment rate for Transportation and Utilities was 12.9 percent, for the sector of Information 12.0 percent and for the Financial Activities, 5.1 percent. In June 2019, the unemployment rates for these sectors were 3.7, 2.7 and 2 percent, respectively. The latest Federal Reserve Board’s Monetary Policy Report shows that in general the most impacted firms in these sectors are small businesses.3. Accordingly, in view of above impacts on small businesses from the COVID–19 pandemic and Federal government efforts to provide relief to small businesses and support to the overall economy, SBA proposes to increase size standards for 45 industries, and retain the current size standards for 81 industries even though analytical results suggest that 69 of those 81 size standards could be lowered. The proposed size standards are presented in Table 11, Proposed Size Standards Revisions. Also presented in Table 11 are current and calculated size standards for comparison. 3 Board of Governors of the Federal Reserve System (June 2020), Monetary Policy Report, p. 24 (see https://www.federalreserve.gov/ monetarypolicy/files/20200612_mprfullreport.pdf) and U.S. Census Bureau, Small Busines Pulse Survey (https://portal.census.gov/pulse/data). The latest is a recent survey created by the Census Bureau to provide high-frequency, detailed information on participation in small businessspecific initiatives such as the Paycheck Protection Program. Evaluation of SBA Loan Data Before proposing or deciding on an industry’s size standard revision, SBA also considers the impact of size standards revisions on SBA’s loan programs. Accordingly, SBA examined its internal 7(a) and 504 loan data for fiscal years 2016–2018 to assess whether the calculated size standards in Table 4 above need further adjustments to ensure credit opportunities for small businesses through those programs. For the industries reviewed in this rule, the data shows that it is mostly businesses much smaller than the current or proposed size standards that receive SBA’s 7(a) and 504 loans. For example, for industries covered by this rule, more than 99.0 percent of 7(a) and 504 loans in fiscal years 2016–2018 went to businesses below the current or proposed size standards. Proposed Changes to Size Standards Based on the analytical results in Table 4 and considerations of impacts of calculated size standards in terms of access by currently small businesses to SBA’s loans, as discussed above, of a total of one hundred twenty six (126) industries or subindustries (exceptions) with monetary-based size standards in Sectors 48–49, 51, 52 and 53 that are covered by this rule, and considering the current emergency situation due to the COVID–19 pandemic and its impacts on small businesses and the overall economy, SBA proposes to increase size standards for 45 industries, and retain the current size standards for the remaining 81 industries. jbell on DSKJLSW7X2PROD with PROPOSALS2 Special Considerations VerDate Sep<11>2014 20:01 Oct 01, 2020 Jkt 253001 PO 00000 Frm 00016 Fmt 4701 Sfmt 4702 E:\FR\FM\02OCP2.SGM 02OCP2 62387 Federal Register / Vol. 85, No. 192 / Friday, October 2, 2020 / Proposed Rules TABLE 11—PROPOSED SIZE STANDARDS REVISIONS NAICS codes 481219 484110 484121 484122 .......... .......... .......... .......... 484210 .......... 484220 .......... jbell on DSKJLSW7X2PROD with PROPOSALS2 484230 .......... 485111 485112 485113 485119 485210 485310 485320 485410 485510 485991 485999 .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... 486210 486990 487110 487210 487990 488111 488119 488190 488210 488310 488320 488330 488390 488410 488490 488510 488991 488999 491110 492210 493110 493120 493130 493190 511210 512110 512120 512131 512132 512191 512199 512240 512290 515111 515112 515120 515210 517410 517919 518210 519110 519120 519190 522110 522120 522130 522190 522210 .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... VerDate Sep<11>2014 Calculated size standard ($ million) NAICS U.S. industry title Other Nonscheduled Air Transportation ....................... General Freight Trucking, Local ................................... General Freight Trucking, Long-Distance, Truckload .. General Freight Trucking, Long-Distance, Less Than Truckload. Used Household and Office Goods Moving ................. Specialized Freight (except Used Goods) Trucking, Local. Specialized Freight (except Used Goods) Trucking, Long-Distance. Mixed Mode Transit Systems ....................................... Commuter Rail Systems ............................................... Bus and Other Motor Vehicle Transit Systems ............ Other Urban Transit Systems ....................................... Interurban and Rural Bus Transportation ..................... Taxi Service .................................................................. Limousine Service ........................................................ School and Employee Bus Transportation ................... Charter Bus Industry .................................................... Special Needs Transportation ...................................... All Other Transit and Ground Passenger Transportation. Pipeline Transportation of Natural Gas ........................ All Other Pipeline Transportation ................................. Scenic and Sightseeing Transportation, Land ............. Scenic and Sightseeing Transportation, Water ............ Scenic and Sightseeing Transportation, Other ............ Air Traffic Control ......................................................... Other Airport Operations .............................................. Other Support Activities for Air Transportation ............ Support Activities for Rail Transportation ..................... Port and Harbor Operations ......................................... Marine Cargo Handling ................................................ Navigational Services to Shipping ................................ Other Support Activities for Water Transportation ....... Motor Vehicle Towing ................................................... Other Support Activities for Road Transportation ........ Freight Transportation Arrangement ............................ Packing and Crating ..................................................... All Other Support Activities for Transportation ............. Postal Services ............................................................. Local Messengers and Local Delivery ......................... General Warehousing and Storage .............................. Refrigerated Warehousing and Storage ....................... Farm Product Warehousing and Storage .................... Other Warehousing and Storage ................................. Software Publishers ...................................................... Motion Picture and Video Production ........................... Motion Picture and Video Distribution .......................... Motion Picture Theaters (except Drive-Ins) ................. Drive-In Motion Picture Theaters ................................. Teleproduction and Other Postproduction Services .... Other Motion Picture and Video Industries .................. Sound Recording Studios ............................................. Other Sound Recording Industries ............................... Radio Networks ............................................................ Radio Stations .............................................................. Television Broadcasting ............................................... Cable and Other Subscription Programming ............... Satellite Telecommunications ....................................... All Other Telecommunications ..................................... Data Processing, Hosting, and Related Services ........ News Syndicates .......................................................... Libraries and Archives .................................................. All Other Information Services ..................................... Commercial Banking .................................................... Savings Institutions ....................................................... Credit Unions ................................................................ Other Depository Credit Intermediation ........................ Credit Card Issuing ....................................................... 20:01 Oct 01, 2020 Jkt 253001 PO 00000 Frm 00017 Fmt 4701 750 750 750 750 750 million million million million million Sfmt 4702 in in in in in Proposed size standard ($ million) Current size standard ($ million) $22.0 9.0 22.0 38.0 $22.0 30.0 30.0 38.0 $16.5 30.0 30.0 30.0 21.0 15.0 30.0 30.0 30.0 30.0 22.0 30.0 30.0 25.5 41.5 28.5 33.0 28.0 13.0 12.5 26.5 13.0 13.0 16.0 25.5 41.5 28.5 33.0 28.0 16.5 16.5 26.5 16.5 16.5 16.5 16.5 16.5 16.5 16.5 16.5 16.5 16.5 16.5 16.5 16.5 16.5 36.5 31.5 18.0 12.5 22.0 30.5 25.5 27.5 30.0 38.0 39.0 26.5 23.5 7.0 16.0 17.5 17.5 22.0 8.0 10.5 25.0 32.0 13.5 32.0 40.0 33.0 26.0 39.5 11.0 19.5 25.0 9.5 20.0 41.5 36.0 41.5 41.5 38.5 33.0 33.0 32.0 18.5 26.5 assets assets assets assets assets 36.5 40.5 18.0 12.5 22.0 35.0 35.0 35.0 30.0 41.5 41.5 41.5 41.5 8.0 16.0 17.5 30.0 22.0 8.0 30.0 30.0 32.0 30.0 32.0 41.5 35.0 34.5 41.5 11.0 34.5 25.0 9.5 20.0 41.5 41.5 41.5 41.5 38.5 35.0 35.0 32.0 18.5 30.0 assets assets assets assets assets 30.0 40.5 8.0 8.0 8.0 35.0 35.0 35.0 16.5 41.5 41.5 41.5 41.5 8.0 8.0 16.5 30.0 8.0 8.0 30.0 30.0 30.0 30.0 30.0 41.5 35.0 34.5 41.5 8.0 34.5 22.0 8.0 12.0 35.0 41.5 41.5 41.5 35.0 35.0 35.0 30.0 16.5 30.0 assets assets assets assets assets 750 750 750 750 750 E:\FR\FM\02OCP2.SGM million million million million million in in in in in 02OCP2 600 600 600 600 600 million million million million million in in in in in 62388 Federal Register / Vol. 85, No. 192 / Friday, October 2, 2020 / Proposed Rules TABLE 11—PROPOSED SIZE STANDARDS REVISIONS—Continued NAICS codes 522220 522291 522292 522293 522294 522298 522310 522320 .......... .......... .......... .......... .......... .......... .......... .......... 522390 523110 523120 523130 523140 523210 523910 523920 523930 523991 523999 524113 524114 524127 524128 .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... 524130 524210 524291 524292 .......... .......... .......... .......... 524298 525110 525120 525190 525910 525920 525990 531110 531120 .......... .......... .......... .......... .......... .......... .......... .......... .......... 531130 531190 531210 531311 531312 531320 531390 532111 532112 532120 .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... 532210 532281 532282 532283 532284 532289 532310 532411 .......... .......... .......... .......... .......... .......... .......... .......... jbell on DSKJLSW7X2PROD with PROPOSALS2 532412 .......... 532420 .......... 532490 .......... 533110 .......... VerDate Sep<11>2014 Calculated size standard ($ million) NAICS U.S. industry title Sales Financing ............................................................ Consumer Lending ....................................................... Real Estate Credit ........................................................ International Trade Financing ....................................... Secondary Market Financing ........................................ All Other Nondepository Credit Intermediation ............ Mortgage and Nonmortgage Loan Brokers .................. Financial Transactions Processing, Reserve, and Clearinghouse Activities. Other Activities Related to Credit Intermediation ......... Investment Banking and Securities Dealing ................ Securities Brokerage .................................................... Commodity Contracts Dealing ...................................... Commodity Contracts Brokerage ................................. Securities and Commodity Exchanges ........................ Miscellaneous Intermediation ....................................... Portfolio Management .................................................. Investment Advice ........................................................ Trust, Fiduciary, and Custody Activities ....................... Miscellaneous Financial Investment Activities ............. Direct Life Insurance Carriers ...................................... Direct Health and Medical Insurance Carriers ............. Direct Title Insurance Carriers ..................................... Other Direct Insurance (except Life, Health, and Medical) Carriers. Reinsurance Carriers .................................................... Insurance Agencies and Brokerages ........................... Claims Adjusting ........................................................... Third Party Administration of Insurance and Pension Funds. All Other Insurance Related Activities .......................... Pension Funds .............................................................. Health and Welfare Funds ........................................... Other Insurance Funds ................................................. Open-End Investment Funds ....................................... Trusts, Estates, and Agency Accounts ........................ Other Financial Vehicles .............................................. Lessors of Residential Buildings and Dwellings .......... Lessors of Nonresidential Buildings (except Miniwarehouses). Lessors of Miniwarehouses and Self-Storage Units .... Lessors of Other Real Estate Property ........................ Offices of Real Estate Agents and Brokers ................. Residential Property Managers .................................... Nonresidential Property Managers ............................... Offices of Real Estate Appraisers ................................ Other Activities Related to Real Estate ........................ Passenger Car Rental .................................................. Passenger Car Leasing ................................................ Truck, Utility Trailer, and RV (Recreational Vehicle) Rental and Leasing. Consumer Electronics and Appliances Rental ............. Formal Wear and Costume Rental .............................. Video Tape and Disc Rental ........................................ Home Health Equipment Rental ................................... Recreational Goods Rental .......................................... All Other Consumer Goods Rental .............................. General Rental Centers ................................................ Commercial Air, Rail, and Water Transportation Equipment Rental and Leasing. Construction, Mining, and Forestry Machinery and Equipment Rental and Leasing. Office Machinery and Equipment Rental and Leasing Other Commercial and Industrial Machinery and Equipment Rental and Leasing. Lessors of Nonfinancial Intangible Assets (except Copyrighted Works). 20:01 Oct 01, 2020 Jkt 253001 PO 00000 Frm 00018 Fmt 4701 Sfmt 4702 Proposed size standard ($ million) Current size standard ($ million) 38.0 41.5 40.0 31.0 41.5 35.5 13.0 39.5 41.5 41.5 41.5 41.5 41.5 41.5 13.0 41.5 41.5 41.5 41.5 41.5 41.5 41.5 8.0 41.5 25.0 41.0 37.0 32.5 26.5 33.0 27.0 35.5 27.5 41.5 41.5 37.5 38.5 41.5 39.0 25.0 41.5 41.5 41.5 41.5 41.5 41.5 41.5 41.5 41.5 41.5 41.5 41.5 41.5 41.5 22.0 41.5 41.5 41.5 41.5 41.5 41.5 41.5 41.5 41.5 41.5 41.5 41.5 41.5 41.5 39.5 13.0 18.0 40.0 41.5 13.0 22.0 40.0 41.5 8.0 22.0 35.0 27.0 32.5 32.5 32.5.0 31.5 32.5.0 32.5 23.5 28.0 27.0 35.00 35.0 35.0 35.0 35.0 35.0 30.0 30.0 16.5 35.0 35.0 35.0 35.0 35.0 35.0 30.0 30.0 20.5 16.0 13.0 11.0 17.0 8.5 17.0 41.5 41.0 41.5 30.0 30.0 13.0 11.0 17.0 8.5 17.0 41.5 41.5 41.5 30.0 30.0 8.0 8.0 8.0 8.0 8.0 41.5 41.5 41.5 40.5 12.5 31.0 36.0 7.5 11.0 7.5 40.0 41.5 22.0 31.0 36.0 8.0 11.0 8.0 40.0 41.5 22.0 30.0 35.0 8.0 8.0 8.0 35.0 34.0 35.0 35.0 32.5 30.0 35.0 35.0 35.0 35.0 35.0 41.5 41.5 E:\FR\FM\02OCP2.SGM 02OCP2 62389 Federal Register / Vol. 85, No. 192 / Friday, October 2, 2020 / Proposed Rules Table 12, Summary of Proposed Size Standards Revisions by Sector, below, summarizes the proposed changes to size standards in Table 11 (above) by NAICS sector. TABLE 12—SUMMARY OF PROPOSED SIZE STANDARDS REVISIONS BY SECTOR Size standards lowered Size standards maintained Sector name 48–49 .............................................................. 51 .................................................................... 52* ................................................................... 53 .................................................................... Transportation and Warehousing (1) ............. Information ..................................................... Finance and Insurance (2) ............................. Real Estate and Rental and Leasing (3) ....... 18 8 10 9 0 0 0 0 25 11 29 16 All Sectors (3) ................................................. ......................................................................... 45 0 81 Evaluation of Dominance in Field of Operation SBA has determined that for the industries which it has evaluated in this proposed rule, no individual firm at or below the proposed size standard would be large enough to dominate its field of operation. At the proposed size standards levels, if adopted, the small business share of total industry receipts among those industries was, on average, 1.9 percent, varying from 0.01 percent to 33.3 percent. Also, at the proposed asset-based size standards levels, banks and thrifts have a share of 0.004 percent, with the minority institutions having a share of 0.32 percent. Credit unions have a market share of 0.05 percent. These market shares effectively preclude a firm at or below the proposed size standards from exerting control on any of the industries. Alternatives Considered jbell on DSKJLSW7X2PROD with PROPOSALS2 Size standards increased NAICS Sector By law, SBA is required to develop numerical size standards for establishing eligibility for Federal small business assistance programs and to review every five years all size standards and make necessary adjustments to reflect the current industry structure and Federal market conditions. Other than varying the levels of size standards by industry and changing the measures of size standards (e.g., using annual receipts vs. the number of employees), no practical alternatives exist to the systems of numerical size standards. The proposal is to increase size standards where the data suggested increases are warranted, and to retain, in response to the COVID–19 national emergency and resultant economic impacts on small businesses, all current size standards where the data suggested lowering is appropriate. Nonetheless, SBA also considered two other alternatives. The alternative option one was to propose changes exactly as suggested by the analytical VerDate Sep<11>2014 20:01 Oct 01, 2020 Jkt 253001 results. The alternative option two was to retain all current size standards. The first option would cause a substantial number of currently small businesses to lose their small business status and hence to lose their access to Federal small business assistance, especially small business set-aside contracts and SBA’s financial assistance in some cases. During the first 5-year review of size standards, some commenters had expressed concerns about the SBA’s policy of not lowering size standards based on the analytical results. As part of the option one, SBA considered but is not proposing to increase 45 size standards as suggested by analytical results and mitigate the impact of the decreases to size standards, by adjusting the calculated sizes considering the impact on small business access to Federal contracting and SBA loans. However, in the present situation with the global COVID–19 pandemic resulting in high levels of risk and dramatic reductions in economic activity of unprecedented nature, SBA presents only the impacts of adopting the analytical results without adjustment in alternative option one. SBA will adopt this approach temporarily and may reevaluate this approach as the economic situation evolves. Under the second option, given the current COVID–19 pandemic, SBA considered retaining the current level of all size standards even though the current analysis may suggest changing them. SBA considers that the option of retaining all size standards at this moment provides the opportunity to reassess the economic situation once the economic recovery starts. Under this option, as the current situation develops, SBA will be able to assess new data available on economic indicators, federal procurement, and SBA loans as well, before adopting changes to size standards. However, SBA is not adopting option two because PO 00000 Frm 00019 Fmt 4701 Sfmt 4702 the Regulatory Impact Analysis shows that retaining all size standards at their current levels is more onerous for the small businesses than the option of adopting increases of size standards and retaining the rest. SBA may reevaluate this approach as the current economic situation evolves. Request for Comments SBA invites public comments on this proposed rule, especially on the following issues: 1. SBA seeks feedback on whether SBA’s proposal to increase 45 size standards and retain 81 size standards is appropriate given the results from the latest available industry and Federal contracting data of each industry and subindustry (exception) reviewed in this proposed rule, along with ongoing uncertainty and dramatic contraction in economic activity due to the global COVID–19 pandemic. SBA also seeks suggestions, along with supporting facts and analysis, for alternative standards, if they would be more appropriate than the proposed size standards. 2. SBA also seeks comments on whether SBA should not lower any size standards in view of COVID–19 pandemic and its adverse impacts on small businesses as well as on the overall economic situation when analytical results suggest some size standards could be lowered. SBA believes that lowering size standards under the current economic environment would run counter to what Congress and Federal government are doing to aid and provide relief to the nation’s small businesses impacted by the COVID–19 pandemic. 3. Given the uncertainty produced by the global COVID–19 pandemic and the economic consequences, SBA would like to receive comments from the public on the possibility of lowering size standards while mitigating the consequences of the lower standards. 4. Given the lack of industry data at the sub-industry level, SBA has E:\FR\FM\02OCP2.SGM 02OCP2 jbell on DSKJLSW7X2PROD with PROPOSALS2 62390 Federal Register / Vol. 85, No. 192 / Friday, October 2, 2020 / Proposed Rules proposed to leave the size standard for Non-Vessel Owning Common Carriers and Household Good Forwarders (‘‘exception’’ under NAICS 488510) at its current level. SBA invites comments, along with supporting information, on this proposal. Alternatively, in view of insignificant Government contracting, SBA also welcomes comments on whether it should continue to have a higher size standard for Non-Vessel Owning Common Carriers and Household Good Forwarders as an ‘‘exception’’ under NAICS 488510 or should it apply the same $17.5 million proposed size standard for the overall industry. Finally, given the lack of industry data at the sub-industry level to accurately evaluate the size standard, SBA seeks comments on whether it should eliminate the exception and apply the overall size standard for NAICS 488510. 5. Because of the lack of data to review the industry structure, SBA has proposed to leave the size standard for Postal Service (NAICS 491110) at the current level of $8 million in average annual revenue. SBA invites comments on this proposal as well as suggestions, along with supporting information, if a different size standard is more appropriate. 6. As noted earlier, the 2012 Economic Census special tabulation includes data only for two NAICS codes within NAICS Subsector 525: NAICS 525910, Open-End Investment Funds, and NAICS 525990, Other Financial Vehicles. Because all industries in that Subsector currently share the same $35.0 million receipts based size standard, SBA applies the results based on data for NAICS 525910 and 525990, as shown in Table 4 (above), to all remaining industries within this Subsector, obtaining a common size standard of $32.5 million. While the reduced size standard represents a slight decrease from the current $35.0 million level, SBA decided to retain the current size standards, although this would have virtually no impacts on the number of small firms nor on the amount of Federal contract dollars awarded to small firms under the current size standards. SBA invites comments or suggestions along with supporting information with respect to the following: a. Whether SBA should adopt common size standards for those industries or establish a separate size standard for each industry, and b. Whether the reduced common size standards for those industries are at the correct levels or what would be more appropriate if what SBA has proposed are not appropriate. VerDate Sep<11>2014 20:01 Oct 01, 2020 Jkt 253001 7. Similarly, SBA proposes a $750 million common assets-based size standard for four industries within NAICS Industry Group 5221, Depository Credit Intermediation (i.e., NAICS 522110, 522120, 522130, and 522190) and on industry in NAICS 5222. Nondepository Credit Intermediation (i.e., NAICS 522210). SBA invites comments or suggestions along with supporting information with respect to whether SBA should adopt common size standards for those industries or establish a separate size standard for each industry. 8. In calculating the overall industry size standard, SBA has assigned equal weight to each of the five primary factors in all industries and subindustries covered by this proposed rule. SBA seeks feedback on whether it should assign equal weight to each factor or on whether it should give more weight to one or more factors for certain industries or subindustries. Recommendations to weigh some factors differently than others should include suggested weights for each factor along with supporting facts and analysis. 9. Finally, SBA seeks comments on data sources it used to examine industry and Federal market conditions, as well as suggestions on relevant alternative data sources that the Agency should evaluate in reviewing or modifying size standards for industries covered by this proposed rule. Public comments on the above issues are very valuable to SBA for validating its proposed size standards revisions in this proposed rule. Commenters addressing size standards for a specific industry or a group of industries should include relevant data and/or other information supporting their comments. If comments relate to the application of size standards for Federal procurement programs, SBA suggests that commenters provide information on the size of contracts in their industries, the size of businesses that can undertake the contracts, start-up costs, equipment and other asset requirements, the amount of subcontracting, other direct and indirect costs associated with the contracts, the use of mandatory sources of supply for products and services, and the degree to which contractors can mark up those costs. PO 00000 Frm 00020 Fmt 4701 Sfmt 4702 Compliance With Executive Orders 12866 and 13771, the Regulatory Flexibility Act (5 U.S.C. 601–612), Executive Orders 13563, 12988, and 13132, and the Paperwork Reduction Act (44 U.S.C. Ch. 35) Executive Order 12866 The Office of Management and Budget (OMB) has determined that this proposed rule is a significant regulatory action for purposes of Executive Order 12866. Accordingly, in the next section SBA provides a Regulatory Impact Analysis of this proposed rule, including: (1) A statement of the need for the proposed action, (2) an examination of alternative approaches, and (3) an evaluation of the benefits and costs—both quantitative and qualitative—of the proposed action and the alternatives considered. However, this rule is not a ‘‘major rule’’ under the Congressional Review Act, 5 U.S.C. 800. Regulatory Impact Analysis 1. What is a need for this regulatory action? Under the Small Business Act (Act) (15 U.S.C. 632(a)), SBA’s Administrator is responsible for establishing small business size definitions (or ‘‘size standards’’) and ensuring that such definitions vary from industry to industry to reflect differences among various industries. The Jobs Act requires SBA to review every five years all size standards and make necessary adjustments to reflect current industry and Federal market conditions. This proposed rule is part of the second 5year review of size standards in accordance with the Jobs Act. The first 5-year review of size standards was completed in early 2016. Such periodic reviews of size standards provide SBA with an opportunity to incorporate ongoing changes to industry structure and Federal market environment into size standards and to evaluate the impacts of prior revisions to size standards on small businesses. This also provides SBA with an opportunity to seek and incorporate public input to the size standards review and analysis. SBA believes that proposed size standards revisions for industries being reviewed in this rule will make size standards more reflective of the current economic characteristics of businesses in those industries and the latest trends in Federal marketplace. SBA’s mission is to aid and assist small businesses through a variety of financial, procurement, business development and counseling, and disaster assistance programs. To determine the actual intended beneficiaries of these programs, SBA E:\FR\FM\02OCP2.SGM 02OCP2 62391 Federal Register / Vol. 85, No. 192 / Friday, October 2, 2020 / Proposed Rules establishes numerical size standards by industry to identify businesses that are deemed small. The proposed revisions to the existing size standards for 126 industries in NAICS Sectors 48–49, 51, 52 and 53 are consistent with SBA’s statutory mandates to help small businesses grow and create jobs and to review and adjust size standards every five years. This regulatory action promotes the Administration’s goals and objectives as well as meets the SBA’s statutory responsibility. One of SBA’s goals in support of promoting the Administration’s objectives is to help small businesses succeed through fair and equitable access to capital and credit, Federal Government contracts and purchases, and management and technical assistance. Reviewing and modifying size standards, when appropriate, ensures that intended beneficiaries are able to access Federal small business programs that are designed to assist them to become competitive and create jobs. 2. What are the potential benefits and costs of this regulatory action? OMB directs agencies to establish an appropriate baseline to evaluate any benefits, costs, or transfer impacts of regulatory actions and alternative approaches considered. The baseline should represent the agency’s best assessment of what the world would look like absent the regulatory action. For a new regulatory action promulgating modifications to an existing regulation (such as modifying the existing size standards), a baseline assuming no change to the regulation (i.e., making no changes to current size standards) generally provides an appropriate benchmark for evaluating benefits, costs, or transfer impacts of proposed regulatory changes and their alternatives. Proposed Changes to Size Standards Based on the results from analyses of latest industry and Federal contracting data, as well as consideration of the impact of size standards changes on small businesses and significant adverse impacts of the COVID–19 emergency on small businesses and the overall economic activity, of the total of 126 industries and exceptions in Sectors 48– 49, 51, 52 and 53 that have monetarybased size standards, SBA proposes to increase size standards for 45 industries, and maintain current size standards for remaining 79 industries and 2 exceptions. The Baseline For purposes of this regulatory action, the baseline represents maintaining the ‘‘status quo,’’ i.e., making no changes to the current size standards. Using the number of small businesses and levels of benefits (such as set-aside contracts, SBA’s loans, disaster assistance, etc.) they receive under the current size standards as a baseline, one can examine the potential benefits, costs and transfer impacts of proposed changes to size standards on small businesses and on the overall economy. Based on the 2012 Economic Census (the latest available), of a total of about 700,544 businesses in industries in Sectors 48–49, 51, 52 (excluding assetsbased size standards), and 53 for which SBA evaluated their current receipt based size standards, 97.2 percent are considered small under the current size standards. That percentage varies from 95.8 percent in Sector 51 to 97.9 percent in Sector 53. Additionally, based on the data from FDIC and National Credit Union Administration (NCUA), from a total of about 5,415 depository institutions. 77.3 percent corresponds to small depository institutions, and from a total of 5,492 credit unions, 91.2 percent are small under the current assets-based size standards. Based on the data from FPDS–NG for fiscal years 2016–2018, about 13,964 unique firms in those industries with receipts-based size standards received at least one Federal contract during that period, of which 76.8 percent were small under the current size standards. For these sectors, of $19.5 billion in total average annual contract dollars awarded to businesses during that period, 21.2 percent went to small businesses. From the total small business contract dollars awarded during the period considered, 45.5 percent were awarded through various small business set-aside programs and 54.5 percent were awarded through non-set aside contracts. Based on the FDIC and NCUA data respectively, from a total of $18,034.4 billion in assets, 4.6 percent are owned by small depository institutions. With respect to Credit Unions, from a total of $1,470.8 billion in assets, 25.7 percent are owned by small credit unions. Based on the SBA’s internal data on its loan programs for fiscal years 2016– 2018, small businesses in those industries received, on an annual basis, a total of nearly 7,232 7(a) and 504 loans in that period, totaling about $2.7 billion, of which 84.6 percent was issued through the 7(a) program and 15.4 percent was issued through the 504/CDC program. During fiscal years 2016–2018, small businesses in those industries also received 2,544 loans through the SBA’s Economic Injury Disaster Loan (EIDL) program, totaling about $208.6 million on an annual basis. Table 13, Baseline for All Industries, below, provides these baseline results by sector, for receipts-based size standards industries and assets-based size standards industries. Increases to Size Standards As stated above, of 126 monetary based size standards in Sectors 48–49, 51, 52, and 53 that are reviewed in this rule, based on the results from analyses of latest industry and Federal market data as well as impacts of size standards changes on small businesses, in this rule, SBA proposes to increase 45 size standards, of which 40 are receiptsbased and five assets-based. Below are descriptions of the benefits, costs, and transfer impacts of these proposed increases to size standards. TABLE 13—BASELINE FOR ALL INDUSTRIES jbell on DSKJLSW7X2PROD with PROPOSALS2 Sector 48–49 Baseline All Industries (current size standards) .................... Total firms (Economic Census) ...................................... Total small firms under current size standards (Economic Census) ............................................................ Small firms as % of total firms ....................................... Total contract dollars ($ million) (FPDS–NG FY2016– 2018) ........................................................................... Total small business contract dollars under current standards ($ million) (FPDS–NG FY2016–2018) ....... Small business dollars as % of total dollars (FPDS–NG FY2016–2018) ............................................................. VerDate Sep<11>2014 20:01 Oct 01, 2020 Jkt 253001 PO 00000 Frm 00021 Sector 51 Sector 52 Sector 53 Total 43 162,147 19 45,821 39 220,860 25 271,716 126 700,544 156,173 96.3% 43,915 95.8% 214,790 97.3% 265,977 97.9% 680,855 97.2% $8,190.0 $7,210.6 $2,997.6 $1,256.8 $22,522.6 $1238.0 $1861.9 $382.0 $668.6 $4,530.5 15.1% 25.8% 12.2% 53.2% 20.1% Fmt 4701 Sfmt 4702 E:\FR\FM\02OCP2.SGM 02OCP2 62392 Federal Register / Vol. 85, No. 192 / Friday, October 2, 2020 / Proposed Rules TABLE 13—BASELINE FOR ALL INDUSTRIES—Continued Sector 48–49 jbell on DSKJLSW7X2PROD with PROPOSALS2 Total No. of unique firms getting contracts (FPDS–NG FY2016–2018) ............................................................. Total No. of unique small firms getting small business contracts (FPDS–NG FY2016–2018) ......................... Small business firms as % of total firms ........................ No. of 7(a) and 504/CDC loans (FY 2016–2018) .......... Amount of 7(a) and 504 loans ($ million) (FY 2016– 2018) ........................................................................... No. of EIDL loans (FY 2016–2018) ................................ Amount of EIDL loans ($million) (FY 2016–2018) ......... Total Number of Depository Institutions (FDIC, SDI) (2018) .......................................................................... Number of Small Depository Institutions (FDIC, SDI) (2018) .......................................................................... Small firms as % of total Depository Institutions (2018) Total Assets of Depository Institutions ($ million) (FDIC, SDI) (2018) ...................................................... Total Assets of Small Depository Institutions ($ million) (FDIC, SDI) (2018) ...................................................... SB Assets as % of Total Assets .................................... Total Number of Credit Unions (NCUA) (2018) ............. Number of small Credit Unions (NCUA) (2018) ............. Small firms as % of total Depository Institutions ............ Total Assets of Credit Unions ($ million) (NCUA) (2018) .......................................................................... Total Assets of Small Credit Unions ($ million) (NCUA) (2018) .......................................................................... SB Assets as % of Total Assets of Credit Unions ......... Benefits of Increases to Size Standards The most significant benefit to businesses from proposed increases to size standards is gaining eligibility for Federal small business assistance programs or retaining that eligibility for a longer period. These include SBA’s business loan programs, EIDL program, and Federal procurement programs intended for small businesses. Federal procurement programs provide targeted, set-aside opportunities for small businesses under the SBA’s various business development and contracting programs, such as 8(a)/BD (business development), small disadvantaged businesses (SDB), small businesses located in Historically Underutilized Business Zones (HUBZone), womenowned small businesses (WOSB), economically disadvantaged womenowned small businesses (EDWOSB), and service-disabled veteran-owned small businesses (SDVOSB). Besides set-aside contracting and financial assistance discussed above, small businesses also benefit through reduced fees, less paperwork, and fewer compliance requirements that are available to small businesses through Federal government. However, SBA has no data to estimate the number of small businesses receiving such benefits. Based on the 2012 Economic Census (latest available SBA estimates that in 40 industries in NAICS Sectors 48–49, 51, 52, and 53 for which it has proposed VerDate Sep<11>2014 20:01 Oct 01, 2020 Jkt 253001 Sector 51 Frm 00022 Sector 53 Total 4,017 5,634 572 4,276 14,005 3,117 77.5% 3,662 4,058 72.0% 524 309 54.04% 1,280 3,432 80.3 1,766 10,691 76.3% 7,232 $828.5 186 $12.5 $210.5 31 $3.3 $519.6 71 $3.6 $1,135.6 2,256 $189.2 $2,694.2 2,544 $208.6 ........................ ........................ 5,415 ........................ .................... ........................ ........................ ........................ ........................ 4,188 77.3% ........................ ........................ .................... .................... ........................ ........................ $18,034,370.50 ........................ .................... ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ $837,835.6 4.6% 5,492 5,010 91.2% ........................ ........................ ........................ ........................ ........................ .................... .................... .................... .................... .................... ........................ ........................ $1,470,838.7 ........................ .................... ........................ ........................ ........................ ........................ $377,619.2 25.67% ........................ ........................ .................... .................... to increase receipts-based size standards, more than 1,790 firms (see Table 13 above), not small under the current size standards, will become small under the proposed size standards increases and therefore become eligible for these programs. That represents about 0.5 percent of all firms classified as small under the current size standards in industries for which SBA has proposed increasing size standards. If adopted, proposed size standards would result in an increase to the small business share of total receipts in those industries from 29.9 percent to 32.7 percent. With more businesses qualifying as small under the proposed increases to size standards, Federal agencies will have a larger pool of small businesses from which to draw for their small business procurement programs. Growing small businesses that are close to exceeding the current size standards will be able to retain their small business status for a longer period under the higher size standards, thereby enabling them to continue to benefit from the small business programs. Based on the FPDS-NG data for fiscal years 2016–2018, SBA estimates that about 60–65 firms that are active in Federal contracting in those industries would gain small business status under the proposed size standards. Based on the same data, SBA estimates that those newly qualified small businesses under PO 00000 Sector 52 Fmt 4701 Sfmt 4702 the proposed increases to size standards, if adopted, could receive Federal small business contracts totaling about $30.0 million annually. That represents a 3.4 percent increase to small business dollars from the sector baseline. Based on the FDIC data for fiscal year 2018, SBA estimates that about 200 depository institutions would gain small institutions status under the proposed increases to size standards with an additional $132.4 billion or 15.8 percent increase in small depository institutions’ assets. Also, based on the NCUA data for fiscal year 2018, SBA estimates that about 85 credit unions would gain small business status under the proposed increases to size standards, with an additional $56 billion in assets or 14.9 percent increase for small credit unions. The added competition from more businesses qualifying as small can result in lower prices to the government for procurements set aside or reserved for small businesses, but SBA cannot quantify this impact. Costs could be higher when full and open contracts are awarded to HUBZone businesses that receive price evaluation preferences. However, with agencies likely setting aside more contracts for small businesses in response to the availability of a larger pool of small businesses under the proposed increases to size standards, HUBZone firms might E:\FR\FM\02OCP2.SGM 02OCP2 62393 Federal Register / Vol. 85, No. 192 / Friday, October 2, 2020 / Proposed Rules actually end up getting more set-aside contracts and fewer full and open contracts, thereby resulting in some cost savings to agencies. While SBA cannot estimate such costs savings as it is impossible to determine the number and value of unrestricted contracts to be otherwise awarded to HUBZone firms will be awarded as set-asides, such cost savings are likely to be relatively small as only a small fraction of full and open contracts are awarded to HUBZone businesses. Under SBA’s 7(a) and 504 loan programs, based on the data for fiscal years 2016–2018, SBA estimates up to about 14 7(a) and 504 loans totaling about $5.7 million could be made to these newly qualified small businesses in those industries under the proposed size standards. That represents a 0.2 percent increase to the loan amount compared to the Group baseline. Newly qualified small businesses will also benefit from the SBA’s EIDL program. Since the benefit provided through this program is contingent on the occurrence and severity of a disaster in the future, SBA cannot make a meaningful estimate of this impact. However, based on the historical trends of the EIDL data, SBA estimates that, on an annual basis, the newly defined small businesses under the proposed increases to size standards, if adopted, could receive 5 EIDL loans, totaling about $0.4 million. Additionally, the newly defined small businesses would also benefit through reduced fees, less paperwork, and fewer compliance requirements that are available to small businesses through the Federal government, but SBA has no data to quantify this impact. Table 14, Impacts of Proposed Increases to Size Standards, provides these results by NAICS sector. TABLE 14—IMPACTS OF PROPOSED INCREASES TO SIZE STANDARDS jbell on DSKJLSW7X2PROD with PROPOSALS2 Sector 48–49 No. of industries with proposed increases to size standards Total current small businesses in industries with proposed increases to size standards (Economic Census 2012) ..... Additional firms qualifying as small under proposed standards (2012 Economic Census) ........................................... Percentage of additional firms qualifying as small relative to current small businesses in industries with proposed increases to size standards .................................................. No. of current unique small firms getting small business contracts in industries with proposed increases to size standards (FPDS–NG FY2016–2018) 1 ............................. Additional small business firms getting small business status (FPDS–NG FY2016–2018) .......................................... % increase to small businesses relative to current unique small firms getting small business contracts in industries with proposed increases to size standards (FPDS–NG FY2016–2018) 1 .................................................................. Total small business contract dollars under current standards in industries with proposed increases to size standards ($ million) (FPDS–NG FY2016–2018) ....................... Estimated additional small business dollars available to newly qualified small firms (Using avg dollars obligated to SBs) ($ million) (FPDS–NG FY 2016–2018) 1 ................... % increase to small business dollars relative to total small business contract dollars under current standards in industries with proposed increases to size standards .......... Total no. of 7(a) and 504 loans to small business in industries with proposed increases to size standards (FY 2016–2018) ........................................................................ Total amount of 7(a) and 504 loans to small businesses in industries with proposed increases to size standards ($ million) (FY 2016–2018) ..................................................... Estimated no. of 7(a) and 504 loans to newly qualified small firms .......................................................................... Estimated 7(a) and 504 loan amounts to newly qualified small firms ($ million) ......................................................... % increase to 7(a) and 504 loan amounts relative to the total amount of 7(a) and 504 loans in industries with proposed increases to size standards .................................... Total no. of EIDL loans to small businesses in industries with proposed increases to size standards (FY 2016– 2018) .................................................................................. Total amount of EIDL loans to small businesses in industries with proposed increases to size standards ($ million) (FY 2016–2018) ................................................................. Estimated no. of EIDL loans to newly qualified small firms .. Estimated EIDL loan amount to newly qualified small firms ($ million) ............................................................................ % increase to EIDL loan amount relative to the total amount of EIDL loans in industries with proposed increases to size standards .................................................. Total current small businesses in industries with Proposed increases to size standards (FDIC) (2018) ........................ VerDate Sep<11>2014 20:01 Oct 01, 2020 Jkt 253001 PO 00000 Frm 00023 Sector 51 Sector 52 Sector 53 Total 18 8 10 9 45 27,255 5,368 135,774 150,404 318,800 184 13 623 970 1,790 0.7% 0.2% 0.5% 0.6% 0.6% 520 334 101 1,605 2,553 32 4 7 21 63 6.2% 1.2% 6.9% 1.3% 2.5% $238.5 $149.6 $160.8 $330.8 $879.7 $7.0 $2.0 $6.1 $15.0 $30.1 2.9% 1.3% 3.8% 4.5% 3.4% 412 58 726 745 1,941 $160.6 $22.5 $246.0 $230.8 $659.9 4 1 4 5 14 $2.4 $0.4 $1.4 $1.5 $5.7 0.3% 0.2% 0.3% 0.1% 0.2% 57 9 0 127 193 $4.9 2 $0.4 1 $2.2 1 $11.8 1 $19.3 5 $0.20 $0.04 $0.05 $0.09 $0.4 1.6% 1.2% 1.4% 0.0% 0.2% 4,188 ........................ .................... Fmt 4701 Sfmt 4702 E:\FR\FM\02OCP2.SGM 02OCP2 62394 Federal Register / Vol. 85, No. 192 / Friday, October 2, 2020 / Proposed Rules TABLE 14—IMPACTS OF PROPOSED INCREASES TO SIZE STANDARDS—Continued Sector 48–49 Sector 51 Additional firms qualifying as small under proposed standards (FDIC) ......................................................................... % Increase small institutions with proposed increases to size standards .................................................................... Total Assets of Small Depository Institutions ($ million) (FDIC, SDI) (2018) ............................................................. Estimated increase in total assets of Small Depository Institutions ($ million) ................................................................ % increase in total assets of small depository institutions .... Number of small Credit Unions (NCUA) (2018) .................... Additional small Credit Unions (NCUA) ................................. % Increase small institutions with proposed increases to size standards .................................................................... Total Assets of small Credit Unions ($ million) (NCUA) (2018) ................................................................................. Estimated increase in total assets of small Credit Unions ($ million) ................................................................................ % increase in total assets of small Credit Unions ................. Sector 52 Sector 53 Total 198 ........................ .................... 4.7% ........................ .................... $837,835.6 $132,439.9 15.8% 5,010 84 1.7% $377,619.2 $56,326.8 14.9% 1 Additional dollars are calculated multiplying average small business dollars obligated per DUNS times change in number of firms. Numbers of firms are calculated using the SBA current size standard, not the CO Size Std-These calculations do not include assets-based industries. 2 Total impact represents total unique number of firms impacted to avoid double counting as some firms are participating in more than one industry. These calculations do not include assets-based industries. jbell on DSKJLSW7X2PROD with PROPOSALS2 Costs of Increases to Size Standards Besides having to register in SAM to be able to participate in Federal contracting and update the SAM profile annually, small businesses incur no direct costs to gain or retain their small business status as a result of increases to size standards. All businesses willing to do business with Federal government have to register in SAM and update their SAM profiles annually, regardless of their size status. SBA believes that a vast majority of businesses that are willing to participate in Federal contracting are already registered in SAM and update their SAM profiles annually. More importantly, this proposed rule does not establish the new size standards for the very first time; rather it just intends to modify the existing size standards in accordance with a statutory requirement and the latest data and other relevant factors. To the extent that the newly qualified small businesses (not depository institutions or credit unions) could become active in Federal procurement, the proposed increases to size standards, if adopted, may entail some additional administrative costs to the government as a result of more businesses qualifying as small for Federal small business programs. For example, there will be more firms seeking SBA loans, more firms eligible for enrollment in the Dynamic Small Business Search (DSBS) database or in certify.sba.gov, more firms seeking certification as 8(a)/BD or HUBZone firms or qualifying for small business, SDB, WOSB, EDWOSB, and SDVOSB status, and more firms applying for VerDate Sep<11>2014 20:01 Oct 01, 2020 Jkt 253001 SBA’s 8(a)/BD and all small business mentor-prote´ge´ programs. With an expanded pool of small businesses, it is likely that Federal agencies would set aside more contracts for small businesses under the proposed increases to size standards. One may surmise that this might result in a higher number of small business size protests and additional processing costs to agencies. However, the SBA’s historical data on size protests shows that the number of size protests decreased following the increases to receipts-based size standards as part of the first 5-year review of size standards. Specifically, on an annual basis, the number of size protests fell from about 600 during fiscal years 2011–2013 (review of most receipts-based size standards was completed by the end of FY 2013), as compared to about 500 during fiscal years 2014–2016 when size standards increases were in effect. That represents a 17 percent decline. Among those newly defined small businesses seeking SBA’s loans, there could be some additional costs associated with compliance and verification of their small business status. However, small business lenders have an option of using the tangible net worth and net income based alternative size standard instead of using the industry-based size standards to establish eligibility for SBA’s loans. For these reasons, SBA believes that these added administrative costs will be minor because necessary mechanisms are already in place to handle these added requirements. Additionally, some Federal contracts may possibly have higher costs. With a greater number of businesses defined as PO 00000 Frm 00024 Fmt 4701 Sfmt 4702 small due to the proposed increases to size standards, Federal agencies may choose to set aside more contracts for competition among small businesses only instead of using a full and open competition. The movement of contracts from unrestricted competition to small business set-aside contracts might result in competition among fewer total bidders, although there will be more small businesses eligible to submit offers under the proposed size standards. However, the additional costs associated with fewer bidders are expected to be minor since, by law, procurements may be set aside for small businesses under the 8(a)/BD, SDB, HUBZone, WOSB, EDWOSB, or SDVOSB programs only if awards are expected to be made at fair and reasonable prices. Costs may also be higher when full and open contracts are awarded to HUBZone businesses that receive price evaluation preferences. However, with agencies likely setting aside more contracts for small businesses in response to the availability of a larger pool of small businesses under the proposed increases to size standards, HUBZone firms might actually end up getting fewer full and open contracts, thereby resulting in some cost savings to agencies. However, such cost savings are likely to be minimal as only a small fraction of unrestricted contracts are awarded to HUBZone businesses. Transfer Impacts of Increases to Size Standards The proposed increases to size standards, if adopted, may result in some redistribution of Federal contracts E:\FR\FM\02OCP2.SGM 02OCP2 jbell on DSKJLSW7X2PROD with PROPOSALS2 Federal Register / Vol. 85, No. 192 / Friday, October 2, 2020 / Proposed Rules between the newly qualified small businesses and large businesses and between the newly qualified small businesses and small businesses under the current standards. However, it would have no impact on the overall economic activity since total Federal contract dollars available for businesses to compete for will not change with changes to size standards. While SBA cannot quantify with certainty the actual outcome of the gains and losses from the redistribution contracts among different groups of businesses, it can identify several probable impacts in qualitative terms. With the availability of a larger pool of small businesses under the proposed increases to size standards, some unrestricted Federal contracts which would otherwise be awarded to large businesses may be set aside for small businesses. As a result, large businesses may lose some Federal contracting opportunities. Similarly, some small businesses under the current size standards may obtain fewer setaside contracts due to the increased competition from more advanced businesses qualifying as small under the proposed increases to size standards. This impact may be offset by a greater number of procurements being set aside for all small businesses. With larger businesses qualifying as small under the higher size standards, smaller small businesses could face some disadvantage in competing for set aside contracts against their larger counterparts. However, SBA cannot quantify these impacts. 3. What alternatives have been considered? Under OMB Circular A–4, SBA is required to consider regulatory alternatives to the proposed changes in the proposed rule. In this section, SBA describes and analyzes two such alternatives to the proposed rule. Alternative Option One to the proposed rule, a more stringent option to the proposed rule, would propose adopting size standards based solely on the analytical results. In other words, the size standards of 45 industries for which the analytical results suggest raising size standards would be raised, and the size standards of 69 industries for which the analytical results suggest lowering size standards would be lowered. Size standards for the remaining 12 industries would be maintained at their current levels. Alternative Option Two, would propose retaining all size standards for all industries, given the uncertainty generated by the ongoing COVID–19 pandemic. Below, SBA discusses and presents the net impacts of each option. VerDate Sep<11>2014 20:01 Oct 01, 2020 Jkt 253001 Alternative Option One: Consider Adopting All Calculated Size Standards As discussed elsewhere in this proposed rule, Alternative Option One would cause a substantial number of currently small businesses to lose their small business status and hence to lose their access to Federal small business assistance, especially small business setaside contracts and SBA’s financial assistance in some cases. These consequences could be mitigated. For example, in response to the 2008 Financial Crisis and economic conditions that followed, SBA adopted a general policy in the first 5-year comprehensive size standards review to not lower any size standard (except to exclude one or more dominant firms) even when the analytical results suggested the size standard should be lowered. Currently, because of the economic challenges presented by the COVID–19 pandemic and the measures taken to protect public health, SBA has decided to propose the same general policy of not lowering size standards in the second 5-year comprehensive size standards review as well. The primary benefit of adopting Alternative Option One is that SBA’s procurement, management, technical and financial assistance resources would be targeted to the most appropriate beneficiaries of such programs according to the analytical results. Adopting the size standards suggested by the analytical results would also promote consistency with analytical results in SBA’s exercise of its authority to determine size standards. SBA seeks public comment on the impact of adopting the size standard as suggested by the analytical results. As explained in the Size Standards Methodology White Paper, in addition to adopting all results of the primary analysis, SBA evaluates other relevant factors as needed such as the impact of the reductions or increases of size standards on the distribution of contracts awarded to small businesses, and may adopt different results with the intention of mitigating potential negative impacts. We have discussed already the benefits and costs of increasing 45 size standards. Below we discuss the benefits and costs of decreasing 69 size standards. Benefits of Decreases to Size Standards The most significant benefit to businesses from decreases to size standards when the SBA’s analysis suggests such decreases is to ensure that size standards are more reflective of latest industry structure and Federal PO 00000 Frm 00025 Fmt 4701 Sfmt 4702 62395 market trends and that Federal small business assistance is more effectively targeted to its intended beneficiaries. These include SBA’s loan programs, EIDL program, and Federal procurement programs intended for small businesses. Federal procurement programs provide targeted, set-aside opportunities for small businesses under SBA’s business development programs, such as small business, 8(a)/BD, SDB HUBZone, WOSB, EDWOSB, and SDVOSB programs. The adoption of smaller size standards when the results support them diminishes the risk of awarding contracts to firms which are not small anymore. Decreasing size standards may reduce the administrative costs of the government, because the risk of awarding contracts to other than small businesses may diminish when the size standards reflect better the structure of the market. The risks of providing SBA’s loans to firms that are not needing them the most, or allowing firms that are not eligible for small business set-asides or to participate on the SBA procurement programs will provide for a better chance for smaller firms to grow and benefit from the opportunities available on the Federal market, and strengthen the small business industrial base for the Federal Government. Costs of Decreases to Size Standards With fewer businesses qualifying as small under the decreases to size standards, Federal agencies will have a smaller pool of small businesses from which to draw for their small business procurement programs. For example, in Option One, during fiscal years 2016– 2018, agencies awarded, on an annual basis, about $3,118 million in small business contracts in those 69 industries for which this Option considered decreasing size standards. Table 15, Impacts of Decreases of Size Standards Under Alternative Option One, below shows that lowering 69 size standards would reduce Federal contract dollars awarded to small businesses by $59.0 million or about 1.9 percent relative to the baseline level, of which more than 50 percent are accounted for by the Transportation and Warehousing sector (NAICS 48–49). Because of the importance of this sector for Federal procurement, SBA would adopt mitigating measures to reduce the negative impact under the assumptions of Option One. SBA could adopt one or more of the following three actions: 1. to accept decreases in size standards as suggested by the analytical results, 2. to decrease size standards by a smaller amount than the calculated threshold, E:\FR\FM\02OCP2.SGM 02OCP2 jbell on DSKJLSW7X2PROD with PROPOSALS2 62396 Federal Register / Vol. 85, No. 192 / Friday, October 2, 2020 / Proposed Rules and 3. to retain the size standards at their current levels. Nevertheless, since Federal agencies are still required to meet the statutory small business contracting goal of 23 percent, actual impacts on the overall set aside activity is likely to be smaller as agencies are likely to award more set aside contracts to small businesses that continue to remain small under the reduced size standards. With fewer businesses qualifying as small, the decreased competition can also result in higher prices to the Government for procurements set aside or reserved for small businesses, but SBA cannot quantify this impact. Decreases to size standards would have a very minor impact on small businesses applying for SBA’s 7(a) and 504 loans because a vast majority of such loans are issued to businesses that are far below the reduced size standards. For example, based on the loan data for fiscal years 2016–2018, Option One estimates that about 36 7(a) and 504 loans with total amounts of $10.7 million could not be available to those small businesses that would lose eligibility under the reduced size standards. That represents about a 0.5 percent decrease of the loan amounts compared to the baseline. Table 15 below shows these results by sector. However, the actual impact could be much less as businesses losing small business eligibility under the decreases to industry-based size standards could still qualify for SBA’s loans under the tangible net worth and net income based alternative size standard. Businesses losing small business status would also be impacted in terms of access to loans through the SBA’s EIDL program. However, SBA expects such impact to be minimal as only a small number of businesses in those industries received such loans during fiscal years 2016–2018. Additionally, all those businesses were below the reduced size standards. Since this program is contingent on the occurrence and severity of a disaster in the future, SBA cannot make a meaningful estimate of this impact. Small businesses becoming other than small if size standards were decreased might lose benefits through reduced fees, less paperwork, and fewer compliance requirements that are available to small businesses through Federal government, but SBA has no data to quantify this impact. However, if agencies determine that SBA’s size VerDate Sep<11>2014 20:01 Oct 01, 2020 Jkt 253001 standards do not adequately serve such purposes, they can establish a different size standard with an approval from SBA if they are required to use SBA’s size standards for their programs. Transfer Impacts of Decreases to Size standards If the size standards were decreased under Alternative Option One, it may result in a redistribution of Federal contracts between small businesses losing the small business status and large businesses and between small businesses losing the small business status and small businesses remaining small under the reduced size standards. However, as under the proposed increases to size standards, it would have no impact on the overall economic activity since total Federal contract dollars available for businesses to compete for will stay the same. While SBA cannot estimate with certainty the actual outcome of the gains and losses among different groups of businesses from contract redistribution resulting from decreases to size standards, it can identify several probable impacts. With a smaller pool of small businesses under the decreases to size standards, some set-aside Federal contracts to be otherwise awarded to small businesses may be competed in unrestricted basis. As a result, large businesses may have more Federal contracting opportunities. However, because agencies are still required by law to award 23 percent of dollars to small businesses, SBA expects the movement of set-aside contracts to unrestricted competition to be limited. For the same reason, small businesses remaining small under the reduced size standards are likely to obtain more set aside contracts due to the reduced competition from fewer businesses qualifying as small under the decreases to size standards. With some larger small businesses losing small business status under the decreases to size standards, smaller small businesses would likely become more competitive in obtaining set aside contracts. However, SBA cannot quantify these impacts. Net Impact of Alternative Option One To estimate the net impacts of Alternative Option One, SBA followed the same methodology used to evaluate the impacts of the proposed size standards (see Table 14 above). However, under Alternative Option One, SBA used the calculated size standards instead of the proposed ones PO 00000 Frm 00026 Fmt 4701 Sfmt 4702 to determine the impacts of changes to current thresholds. The impact of the increases of the calculated size standards were already shown in Table 14 above. Table 15 above and Table 16, Net Impacts of Size Standards Changes under Alternative Option One, below present the impact of the decreases of size standards and the net impact of adopting the calculated results under Alternative Option One, respectively. Based on the 2012 Economic Census, SBA estimates that in 114 industries in NAICS Sectors 48–49, 51, 52 and 53 for which the analytical results suggested to change size standards, about 52 firms (see Table 16, below), would become small under the Option One. That represents about 0.01 percent of all firms classified as small under the current size standards. Based on the FPDS–NG data for fiscal years 2016–2018, SBA estimates that about 89 active firms in Federal contracting in those industries would lose small business status under Alternative Option One, most of them from the Transportation and Warehousing Sector (NAICS 48–49). This represents a decrease of about 0.9 percent of the total number of small businesses participating in Federal contracting under the current size standards. Based on the same data, SBA estimates that about $29.2 million of Federal procurement dollars would not be available to firms losing their small status. This represents a decrease of 0.7 percent from the Group’s baseline. Again, most of the losses are accounted for by the NAICS 48–49 Sector. Based on the SBA’s loan data for fiscal years 2016–2018, the total number of 7(a) and 504 loans may decrease by about 22 loans, and the loan amounts by about $5.0 million. This represents a 0.4 percent decrease of the loan amounts relative to the Group baseline. Firms’ Participation under the SBA’s EIDL program will be affected as well. Since the benefit provided through this program is contingent on the occurrence and severity of a disaster in the future, SBA cannot make a meaningful estimate of this impact. However, based on the historical trends of the EIDL data, SBA estimates that, on an annual basis, the net impact of the Option One on additional firms is a reduction of five (5) loans, and a reduction of loans amounts by $0.45 million for the Group relative to the baseline. Table 16 provides these results by NAICS sector. E:\FR\FM\02OCP2.SGM 02OCP2 62397 Federal Register / Vol. 85, No. 192 / Friday, October 2, 2020 / Proposed Rules TABLE 15—IMPACTS OF DECREASES OF SIZE STANDARDS UNDER ALTERNATIVE OPTION ONE Sector 48–49 No. of industries for which SBA considered decreasing size standards (2012 Economic Census) .................................. Total current small businesses in industries for which SBA considered decreasing size standards (2012 Economic Census) .............................................................................. Estimated no. of firms losing small status for which SBA considered decreasing size standards (2012 Economic Census) .............................................................................. % of Firms losing small status relative to current small businesses in industries for which SBA considered decreasing size standards .............................................................. No. of current unique small firms getting small business contracts in industries for which SBA considered decreasing size standards (FPDS–NG FY2016–2018) 1 ....... Estimated number of small business firms that would have lost small business status in the decreases that SBA considered ................................................................................ % decrease to small business firms relative to current unique small firms getting small business contracts in industries for which SBA considered decreasing size standards (FPDS–NG FY2016–2018) 1 ...................................... Total small business contract dollars under current size standards in industries for which SBA considered decreasing size standards ($ million) (FPDS–NG FY2016– 2018) .................................................................................. Estimated small business dollars not available to firms that would have lost business status (Using avg dollars obligated to SBs) ($ million) 1 (FPDS–NG FY 2016–2018) ..... % decrease to small business dollars relative to total small business contract dollars under current size standards in industries for which SBA considered decreasing to size standards ............................................................................ Total no. of 7(a) and 504 loans to small businesses in industries for which SBA considered decreasing size standards (FY 2016–2018) ......................................................... Total amount of 7(a) and 504 loans to small businesses in industries for which SBA considered decreasing size standards ($ million) (FY 2016–2018) ............................... Estimated no. of 7(a) and 504 loans not available to firms that would have lost small business status ....................... Estimated 7(a) and 504 loan amounts not available to firms that would have small status ($ million) ............................. % decrease to 7(a) and 504 loan amounts relative to the total amount of 7(a) and 504 loans in industries for which SBA considered decreasing size standards ...................... Total no. of EIDL loans to small businesses in industries for which SBA considered decreasing size standards (FY 2016–2018) ........................................................................ Total amount of EIDL loans to small businesses in industries for which SBA considered decreasing size standards ($ million) (FY 2016–2018) ................................................ Estimated no. of EIDL loans not available to firms that would have lost small business status ............................... Estimated EIDL loan amount not available to firms that would have lost small business status ($ million) .............. % decrease to EIDL loan amount relative to the baseline .... Sector 51 Sector 52 Sector 53 Total 23 9 24 13 69 133,032 39,030 76,036 114,495 510,777 1,086 72 246 234 1,738 0.50% 0.19% 0.34% 0.21% 0.92% 2,668 3,592 155 1,652 7,942 89 19 6 36 143 3.3% 0.5% 3.9% 2.2% 1.8% $995 $1,697 $106.0 $320.0 $3,118 $30 $14 $8 $7 $59 3.0% 0.8% 7.8% 2.2% 1.9% 3,250 457 516 964 5,187 $668.0 $183.0 $262.5 $883.0 $1,996.5 30 1 2 3 36 $6.5 $0.4 $1.0 $2.7 $10.7 1.0% 0.2% 0.4% 0.3% 0.5% 129 21 21 2,124 2,295 $7.6 $2.7 $1.3 $176.9 $188.5 3 1 1 5 10 $0.2 3.0% $0.1 4.8% $0.1 4.8% $0.4 0.2% $0.8 0.4% 1 Additional dollars are calculated multiplying average small business dollars obligated per DUNS times change in number of firms. impact represents total unique industries impacted to avoid double counting as some industries have large firms gaining small business status and small firms extending small business status. 2 Total jbell on DSKJLSW7X2PROD with PROPOSALS2 TABLE 16—NET IMPACTS OF SIZE STANDARDS CHANGES UNDER ALTERNATIVE OPTION ONE Sector 48–49 No. of industries with proposed changes to size standards Total no. of small businesses under the current size standards (2012 Economic Census) ........................................... Additional firms qualifying as small under proposed size standards (2012 Economic Census) .................................. % of additional firms qualifying as small relative to total current small businesses ......................................................... VerDate Sep<11>2014 20:01 Oct 01, 2020 Jkt 253001 PO 00000 Frm 00027 Sector 51 Sector 52 Sector 53 Total 41 17 34 22 114 156,173 42,803.4 208,456 265,559 669,991 ¥1,002 ¥60 377 736 52 ¥0.64% ¥0.14% 0.18% 0.3% 0.01% Fmt 4701 Sfmt 4702 E:\FR\FM\02OCP2.SGM 02OCP2 62398 Federal Register / Vol. 85, No. 192 / Friday, October 2, 2020 / Proposed Rules TABLE 16—NET IMPACTS OF SIZE STANDARDS CHANGES UNDER ALTERNATIVE OPTION ONE—Continued Sector 48–49 No. of current unique small firms getting small business contracts (FPDS–NG FY2016–2018) 1 .............................. Additional small firms getting small business status (FPDS– NG FY2016–2018) ............................................................. % increase to small firms relative to current unique small firms getting small business contracts (FPDS–NG FY2016–2018) 1 .................................................................. Total small business contract dollars under current size standards ($ million) (FPDS–NG FY2016–2018) .............. Estimated small business dollars available to newly qualified small firms ($ million) (FPDS–NG FY 2016–2018) 1 .. % increase to dollars relative to total small business contract dollars under current size standards ......................... Total no. of 7(a) and 504 loans to small businesses (FY 2016–2018) ........................................................................ Total amount of 7(a) and 504 loans to small businesses (FY 2016–2018) ................................................................. Estimated no. of additional 7(a) and 504 loans to newly qualified small firms ............................................................ Estimated additional 7(a) and 504 loan amount to newly qualified small firms ($ million) ........................................... % increase to 7(a) and 504 loan amount relative to the total amount of 7(a) and 504 loans to small businesses ........... Total no. of EIDL loans to small businesses (FY 2016– 2018) .................................................................................. Total amount of EIDL loans to small businesses (FY 2016– 2018) .................................................................................. Estimated no. of additional EIDL loans to newly qualified small firms .......................................................................... Estimated additional EIDL loan amount to newly qualified small firms ($ million) ......................................................... % increase to EIDL loan amount relative to the total amount of EIDL loans to small businesses ....................... Total current small businesses in industries with Proposed increases to size standards (FDIC) (2018) ........................ Additional firms qualifying as small under proposed standards (FDIC) ......................................................................... % Increase small institutions with proposed increases to size standards .................................................................... Total Assets of Small Depository Institutions (FDIC, SDI) (2018) ................................................................................. Estimated increase in total assets of Small Depository Institutions ................................................................................. % increase in total assets of Small depository institutions ... Number of small Credit Unions (NCUA) (2018) .................... Additional small Credit Unions (NCUA) ................................. % Increase small institutions with proposed increases to size standards .................................................................... Total Assets of small Credit Unions (NCUA) (2018) ............. Estimated increase in total assets of Small Credit Unions ... % increase in total assets of small Credit Unions ................. Sector 51 Sector 52 Sector 53 Total 3,100 3,872 257 3,215 10,264 ¥60 ¥14 1 ¥16 ¥89 ¥1.9% ¥0.4% 0.4% ¥0.5% ¥0.9% $1,234.2 $1,846.0 $267.3 $650.6 $3,999 ¥$23.5 ¥$11.5 ¥$2.02 7.9 ¥$29.2 1.9% 0.63% 0.75% 1.21% ¥0.73% 3,662 524 1,280 1,766 7,232 $828.5 $210.5 $519.6 $1,135.6 $2,694.2 ¥26 0 2 2 ¥22 ¥$4.1 $0.0 $0.3 ¥$1.2 ¥$5.0 ¥0.5% 0.0% 0.07% ¥0.11% ¥0.4% 186 31 71 2,256 2,544 $12.5 $3.3 $3.6 $189.2 $208.6 ¥1 0 0 ¥4 ¥5 ¥$0.03 ¥$0.1 $0.0 ¥$0.3 ¥$0.45 ¥0.2% ¥2.7% ¥0.3% ¥0.2% ¥0.2% ........................ ........................ 4,188 ........................ .................... ........................ ........................ 198 ........................ .................... ........................ ........................ 4.7% ........................ .................... ........................ ........................ $837,835.6 ........................ .................... ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ $132,439.90 15.8% 5,010 84 ........................ ........................ ........................ ........................ .................... .................... .................... .................... ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ 1.7% $377,619.2 $56,326.80 14.9% ........................ ........................ ........................ ........................ .................... .................... .................... .................... 1 Additional dollars are calculated multiplying average small business dollars obligated per DUNS times change in number of firms. impact represents total unique industries impacted to avoid double counting as some industries have large firms gaining small business status and small firms extending small business status. 2 Total jbell on DSKJLSW7X2PROD with PROPOSALS2 Alternative Option Two: To Retain all Current Size Standards Under this alternative, given the current COVID–19 pandemic, as discussed elsewhere, SBA considered retaining the current level of all size standards even though the current analysis may suggest changing them. SBA considers that the option of retaining all size standards at this moment provides the opportunity to reassess the economic situation once the economic recovery starts. Under this VerDate Sep<11>2014 20:01 Oct 01, 2020 Jkt 253001 option, as the current situation develops, SBA will be able to assess new data available on economic indicators, federal procurement, and SBA loans as well. SBA estimates a net impact of zero for this option, when compared to the baseline. However, if we compare the proposal of adopting 45 increases to size standards with this alternative approach, the benefits for small businesses of adopting the former will not be attained. PO 00000 Frm 00028 Fmt 4701 Sfmt 4702 Executive Order 13771 This proposed rule is not subject to the requirements of E.O. 13771 because SBA has determined that most of the rule’s impacts are income transfers between small and other than small businesses. According to the E.O. 13771 guidance in OMB M–17–21, dated April 5, 2017 (‘‘E.O. 13771 Guidance’’), ‘‘transfers’’ are not covered by E.O. 13771. The E.O. 13771 Guidance also states that ‘‘in some cases, [transfer rules] may impose requirements apart E:\FR\FM\02OCP2.SGM 02OCP2 Federal Register / Vol. 85, No. 192 / Friday, October 2, 2020 / Proposed Rules jbell on DSKJLSW7X2PROD with PROPOSALS2 from transfers, or transfers may distort markets causing inefficiencies. In those cases, the actions would need to be offset to the extent they impose more than de minimis costs.’’ SBA estimates that this rulemaking would impose only de minimis costs on small businesses and would result in negligible compliance costs. Thus, SBA has determined that this rulemaking is exempt from the requirements of E.O. 13771. Details on the estimated costs of this proposed rule can be found in the Regulatory Impact Analysis above. Initial Regulatory Flexibility Analysis According to the Regulatory Flexibility Act (RFA), 5 U.S.C. 601–612, when an agency issues a rulemaking, it must prepare a regulatory flexibility analysis to address the impact of the rule on small entities. This proposed rule, if adopted, may have a significant impact on a substantial number of small businesses in the industries covered by this proposed rule. As described above, this rule may affect small businesses seeking Federal contracts, loans under SBA’s 7(a), 504 and EIDL Programs, and assistance under other Federal small business programs. Immediately below, SBA sets forth an initial regulatory flexibility analysis (IRFA) of this proposed rule addressing the following questions: (1) What are the need for and objective of the rule?; (2) What are SBA’s description and estimate of the number of small businesses to which the rule will apply?; (3) What are the projected reporting, record keeping, and other compliance requirements of the rule?; (4) What are the relevant Federal rules that may duplicate, overlap, or conflict with the rule?; and (5) What alternatives will allow the Agency to accomplish its regulatory objectives while minimizing the impact on small businesses? 1. What is the need for and objective of the rule? Changes in industry structure, technological changes, productivity growth, mergers and acquisitions, and updated industry definitions have changed the structure of many the industries covered by this proposed rule. Such changes can be enough to support revisions to current size standards for some industries. Based on the analysis of the latest data available, SBA believes that the revised standards in this proposed rule more appropriately reflect the size of businesses that need Federal assistance. The 2010 Jobs Act also requires SBA to review all size standards and make necessary adjustments to reflect market conditions. VerDate Sep<11>2014 20:01 Oct 01, 2020 Jkt 253001 2. What are SBA’s description and estimate of the number of small businesses to which the rule will apply? Based on data from the 2012 Economic Census, SBA estimates that there are about 319,000 small firms covered by this rulemaking under industries with proposed changes to size standards. If the proposed rule is adopted in its present form, SBA estimates that an additional 1,790 businesses will become small. 3. What are the projected reporting, record keeping and other compliance requirements of the rule? The proposed size standard changes impose no additional reporting or record keeping requirements on small businesses. However, qualifying for Federal procurement and a number of other programs requires that businesses register in SAM and self-certify that they are small at least once annually. Therefore, businesses opting to participate in those programs must comply with SAM requirements. There are no costs associated with SAM registration or certification. Changing size standards alters the access to SBA’s programs that assist small businesses but does not impose a regulatory burden because they neither regulate nor control business behavior. 4. What are the relevant Federal rules, which may duplicate, overlap or conflict with the rule? Under section 3(a)(2)(C) of the Small Business Act, 15 U.S.C. 632(a)(2)(c), Federal agencies must use SBA’s size standards to define a small business, unless specifically authorized by statute to do otherwise. In 1995, SBA published in the Federal Register a list of statutory and regulatory size standards that identified the application of SBA’s size standards as well as other size standards used by Federal agencies (60 FR 57988 (November 24, 1995)). SBA is not aware of any Federal rule that would duplicate or conflict with establishing size standards. However, the Small Business Act and SBA’s regulations allow Federal agencies to develop different size standards if they believe that SBA’s size standards are not appropriate for their programs, with the approval of SBA’s Administrator (13 CFR 121.903). The Regulatory Flexibility Act authorizes an Agency to establish an alternative small business definition, after consultation with the Office of Advocacy of the U.S. Small Business Administration (5 U.S.C. 601(3)). 5. What alternatives will allow the Agency to accomplish its regulatory objectives while minimizing the impact on small entities? PO 00000 Frm 00029 Fmt 4701 Sfmt 4702 62399 By law, SBA is required to develop numerical size standards for establishing eligibility for Federal small business assistance programs. Other than varying size standards by industry and changing the size measures, no practical alternative exists to the systems of numerical size standards. However, SBA considered two alternatives to its proposal to increase 45 size standards and maintain 81 size standards at their current levels. The first alternative SBA considered was adopting size standards based solely on the analytical results. In other words, the size standards of 45 industries for which the analytical results suggest raising size standards would be raised. However, the size standards of 69 industries for which the analytical results suggest lowering size standards would be lowered. This would cause a significant number of small businesses to lose their small business status. Under the second alternative, in view of the COVID–19 pandemic, SBA considered retaining all size standards at the current levels, even though the analytical results may suggest increasing 45 size standards and decreasing 69. Retaining all size standards at their current levels would be more onerous for the small businesses than the option of adopting 45 increases and retaining the rest of size standards, as proposed. Executive Order 13563 Executive Order 13563 emphasizes the importance of quantifying both costs and benefits, reducing costs, harmonizing rules, and promoting flexibility. A description of the need for this regulatory action and benefits and costs associated with this action including possible distributional impacts that relate to Executive Order 13563 is included above in the Regulatory Impact Analysis under Executive Order 12866. Additionally, Executive Order 13563, section 6, calls for retrospective analyses of existing rules. The review of size standards in the industries covered by this proposed rule is consistent with section 6 of Executive Order 13563 and the 2010 Jobs Act which requires SBA to review all size standards and make necessary adjustments to reflect market conditions. Specifically, the 2010 Jobs Act requires SBA to review at least onethird of all size standards during every 18-month period from the date of its enactment (September 27, 2010) and to review all size standards not less frequently than once every five years, thereafter. SBA had already launched a comprehensive review of size standards in 2007. In accordance with the Jobs E:\FR\FM\02OCP2.SGM 02OCP2 62400 Federal Register / Vol. 85, No. 192 / Friday, October 2, 2020 / Proposed Rules Act, SBA completed the comprehensive review of the small business size standard for each industry, except those for agricultural enterprises previously set by Congress, and made appropriate adjustments to size standards for a number of industries to reflect current Federal and industry market conditions. The first comprehensive review was completed in 2015. Prior to 2007, the last time SBA conducted a comprehensive review of all size standards was during the late 1970s and early 1980s. SBA issued a White Paper entitled ‘‘Size Standards Methodology’’ and published a notice in the April 11, 2019, edition of the Federal Register (84 FR 14587) to advise the public that the document is available for public review and comments. The ‘‘Size Standards Methodology’’ White Paper explains how SBA establishes, reviews, and modifies its receipts-based and employee-based small business size standards. SBA gave appropriate consideration to all input, suggestions, recommendations, and relevant information obtained from industry groups, individual businesses, and Federal agencies in developing size standards for those industries covered by this proposed rule. Executive Order 12988 This action meets applicable standards set forth in sections 3(a) and For the reasons set forth in the preamble, SBA proposes to amend 13 CFR part 121 as follows: 3(b)(2) of Executive Order 12988, Civil Justice Reform, to minimize litigation, eliminate ambiguity, and reduce burden. The action does not have retroactive or preemptive effect. PART 121—SMALL BUSINESS SIZE REGULATIONS Executive Order 13132 1. The authority citation for part 121 continues to read as follows: ■ For purposes of Executive Order 13132, SBA has determined that this proposed rule will not have substantial, direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government. Therefore, SBA has determined that this proposed rule has no federalism implications warranting preparation of a federalism assessment. Authority: 15 U.S.C. 632, 634(b)(6), 636(a)(36), 662, and 694a(9); Pub. L. 116–136, Section 1114. 2. In § 121.201 amend the table ‘‘Small Business Size Standards by NAICS Industry’’ as follows: ■ a. Revise entries ‘‘481219’’, ‘‘484122’’, ‘‘485111’’ through ‘‘485113’’, ‘‘485119’’, ‘‘485210’’, ‘‘485410’’, ‘‘486210’’, Subsector 487, entries ‘‘488210’’, ‘‘488490’’, ‘‘488510’’, ‘‘488510 subentry’’, ‘‘488999’’, ‘‘493120’’, ‘‘493190’’, ‘‘512132’’, ‘‘512199’’, ‘‘512240’’, ‘‘512290’’, ‘‘515111’’, ‘‘517410’’, ‘‘519110’’, ‘‘519120’’, ‘‘522110’’, ‘‘522120’’, ‘‘522130’’, ‘‘522190’’, ‘‘5222210’’, ‘‘522310’’, ‘‘522390’’, ‘‘524210’’, ‘‘524292’’, ‘‘524298’’, ‘‘531210’’, ‘‘531311’’, ‘‘531312’’, ‘‘531320’’, ‘‘531390’’, ‘‘532282’’, ‘‘532283’’, ‘‘532289’’, and ‘‘532411’’ and ■ b. Revise footnote 10. The revisions read as follows: ■ Paperwork Reduction Act For the purpose of the Paperwork Reduction Act, 44 U.S.C. Ch. 35, SBA has determined that this rule will not impose any new reporting or record keeping requirements. List of Subjects in 13 CFR Part 121 Administrative practice and procedure, Government procurement, Government property, Grant programs— business, Individuals with disabilities, Loan programs—business, Reporting and recordkeeping requirements, Small businesses. § 121.201 What size standards has SBA identified by North American Industry Classification System codes? * * * * * SMALL BUSINESS SIZE STANDARDS BY NAICS INDUSTRY NAICS codes Size standards in millions of dollars NAICS U.S. industry title * * * * * Size standards in number of employees * * * * * * * * * * Sectors 48–49—Transportation and Warehousing Subsector 481—Air Transportation * * * * * 481219 ... Other Nonscheduled Air Transportation ................................................................. $22.0. * * * * * Subsector 484—Truck Transportation * * * * * 484122 ... General Freight Trucking, Long-Distance, Less Than Truckload .......................... $38.0. jbell on DSKJLSW7X2PROD with PROPOSALS2 * * * * * Subsector 485—Transit and Ground Passenger Transportation 485111 485112 485113 485119 485210 ... ... ... ... ... Mixed Mode Transit Systems ................................................................................. Commuter Rail Systems ......................................................................................... Bus and Other Motor Vehicle Transit Systems ...................................................... Other Urban Transit Systems ................................................................................. Interurban and Rural Bus Transportation ............................................................... VerDate Sep<11>2014 20:01 Oct 01, 2020 Jkt 253001 PO 00000 Frm 00030 Fmt 4701 Sfmt 4702 $25.5. $41.5. $28.5. $33.0. $28.0. E:\FR\FM\02OCP2.SGM 02OCP2 62401 Federal Register / Vol. 85, No. 192 / Friday, October 2, 2020 / Proposed Rules SMALL BUSINESS SIZE STANDARDS BY NAICS INDUSTRY—Continued NAICS codes Size standards in millions of dollars NAICS U.S. industry title * * * * * 485410 ... School and Employee Bus Transportation ............................................................. $26.5. Size standards in number of employees * * * * * * * * * * * * * 488210 ... Support Activities for Rail Transportation ............................................................... $30.0. * * * * * * * 488490 ... Other Support Activities for Road Transportation .................................................. $16.0. 488510 ... Freight Transportation Arrangement 10 ................................................................... $17.5 10. 488510 Non-Vessel Owning Common Carriers and Household Goods Forwarders ......... $30.0. (Exception). * * * * * * * 488999 ... All Other Support Activities for Transportation ....................................................... $22.0. * * * * * * * * * 493120 ... Refrigerated Warehousing and Storage ................................................................. $32.0. * * * * * * * 493190 ... Other Warehousing and Storage ............................................................................ $32.0. * * * * * * * * * 512132 ... Drive-In Motion Picture Theaters ............................................................................ $11.0. * * * * * * * 512199 ... Other Motion Picture and Video Industries ............................................................ $25.0. * * * * * * * 512240 ... Sound Recording Studios ....................................................................................... $9.5. * * * * * * * 512290 ... Other Sound Recording Industries ......................................................................... $20.0. * * * * * * * Subsector 486—Pipeline Transportation * * * * * 486210 ... Pipeline Transportation of Natural Gas .................................................................. $36.5. * * * * * Subsector 487—Scenic and Sightseeing Transportation 487110 ... 487210 ... 487990 ... Scenic and Sightseeing Transportation, Land ....................................................... Scenic and Sightseeing Transportation, Water ...................................................... Scenic and Sightseeing Transportation, Other ...................................................... $18.0. $12.5. $22.0. Subsector 488—Support Activities for Transportation * * * * * Subsector 493—Warehousing and Storage Sector 51—Information * * * * * jbell on DSKJLSW7X2PROD with PROPOSALS2 Subsector 512—Motion Picture and Sound Recording Industries Subsector 515—Broadcasting (except Internet) 515111 ... Radio Networks ...................................................................................................... VerDate Sep<11>2014 20:01 Oct 01, 2020 Jkt 253001 PO 00000 Frm 00031 Fmt 4701 Sfmt 4702 $41.5. E:\FR\FM\02OCP2.SGM 02OCP2 62402 Federal Register / Vol. 85, No. 192 / Friday, October 2, 2020 / Proposed Rules SMALL BUSINESS SIZE STANDARDS BY NAICS INDUSTRY—Continued NAICS codes Size standards in millions of dollars NAICS U.S. industry title * * * * Size standards in number of employees * * * * * * * * * * * * * * * 522310 ... Mortgage and Nonmortgage Loan Brokers ............................................................ $13.0. * * * * * * * 522390 ... Other Activities Related to Credit Intermediation ................................................... $25.0. * * * * * * * * * 524210 ... Insurance Agencies and Brokerages ..................................................................... $13.0. * * * * * * * 524292 ... Third Party Administration of Insurance and Pension Funds ................................ $40.0. 524298 ... All Other Insurance Related Activities .................................................................... $27.0. * * * * * * * * Subsector 517—Telecommunications * 517410 ... * * * Satellite Telecommunications ................................................................................. * * * * $38.5. * Subsector 519—Other Information Services 519110 ... 519120 ... News Syndicates .................................................................................................... Libraries and Archives ............................................................................................ * * * * $32.0. $18.5. * Sector 52—Finance and Insurance Subsector 522—Credit Intermediation and Related Activities 522110 ... Commercial Banking 8 ............................................................................................ 522120 ... Savings Institutions 8 ............................................................................................... 522130 ... Credit Unions 8 ........................................................................................................ 522190 ... Other Depository Credit Intermediation 8 ................................................................ 522210 ... Credit Card Issuing 8 ............................................................................................... * * * * $750 million sets 8. $750 million sets 8. $750 million sets 8. $750 million sets 8. $750 million sets 8. in asin asin asin asin as- * Subsector 524—Insurance Carriers and Related Activities * * * * * Sector 53—Real Estate and Rental and Leasing Subsector 531—Real Estate jbell on DSKJLSW7X2PROD with PROPOSALS2 531210 531311 531312 531320 531390 * ... ... ... ... ... * * * * Offices of Real Estate Agents and Brokers 10 ........................................................ Residential Property Managers .............................................................................. Nonresidential Property Managers ......................................................................... Offices of Real Estate Appraisers .......................................................................... Other Activities Related to Real Estate .................................................................. $13.0 10. $11.0. $17.0. $8.5. $17.0. Subsector 532—Rental and Leasing Services * 532282 ... 532283 ... * * * * Video Tape and Disc Rental .................................................................................. Home Health Equipment Rental ............................................................................. VerDate Sep<11>2014 20:01 Oct 01, 2020 Jkt 253001 PO 00000 Frm 00032 Fmt 4701 Sfmt 4702 $31.0. $36.0. E:\FR\FM\02OCP2.SGM 02OCP2 62403 Federal Register / Vol. 85, No. 192 / Friday, October 2, 2020 / Proposed Rules SMALL BUSINESS SIZE STANDARDS BY NAICS INDUSTRY—Continued NAICS codes Size standards in millions of dollars NAICS U.S. industry title Size standards in number of employees * * * * * 532289 ... All Other Consumer Goods Rental ......................................................................... $11.0. * * * * * * * 532411 ... Commercial Air, Rail, and Water Transportation Equipment Rental and Leasing $40.0. * * * * * * * * * Footnotes * * * * * 8 NAICS Codes 522110, 522120, 522130, 522190, and 522210—A financial institution’s assets are determined by averaging the assets reported on its four quarterly financial statements for the preceding year. ‘‘Assets’’ for the purposes of this size standard means the assets defined according to the Federal Financial Institutions Examination Council 041 call report form for NAICS Codes 522110, 522120, 522190, and 522210 and the National Credit Union Administration 5300 call report form for NAICS code 522130. * * * * * 10 NAICS codes 488510 (excluding the exception), 531210, 541810, 561510, 561520 and 561920—As measured by total revenues, but excluding funds received in trust for an unaffiliated third party, such as bookings or sales subject to commissions. The commissions received are included as revenues. * * * * * Jovita Carranza, Administrator. [FR Doc. 2020–21593 Filed 10–1–20; 8:45 am] jbell on DSKJLSW7X2PROD with PROPOSALS2 BILLING CODE 8026–03–P VerDate Sep<11>2014 20:01 Oct 01, 2020 Jkt 253001 PO 00000 Frm 00033 Fmt 4701 Sfmt 9990 E:\FR\FM\02OCP2.SGM 02OCP2

Agencies

SMALL BUSINESS ADMINISTRATION

[Federal Register Volume 85, Number 192 (Friday, October 2, 2020)]
[Proposed Rules]
[Pages 62372-62403]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-21593]



[[Page 62371]]

Vol. 85

Friday,

No. 192

October 2, 2020

Part II





 Small Business Administration





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13 CFR Part 121





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Small Business Size Standards: Transportation and Warehousing; 
Information; Finance and Insurance; Real Estate and Rental and Leasing; 
Proposed Rule

Federal Register / Vol. 85 , No. 192 / Friday, October 2, 2020 / 
Proposed Rules

[[Page 62372]]


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SMALL BUSINESS ADMINISTRATION

13 CFR Part 121

RIN 3245-AG90


Small Business Size Standards: Transportation and Warehousing; 
Information; Finance and Insurance; Real Estate and Rental and Leasing

AGENCY: U.S. Small Business Administration.

ACTION: Proposed rule.

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SUMMARY: The U.S. Small Business Administration (SBA) proposes to 
increase its receipts-based small business size definitions (commonly 
referred to as ``size standards'') for North American Industry 
Classification System (NAICS) sectors related to Transportation and 
Warehousing, Information, Finance and Insurance, and Real Estate and 
Rental and Leasing. SBA proposes to increase size standards for 45 
industries in those sectors, including eighteen (18) industries in 
NAICS Sector 48-49 (Transportation and Warehousing), eight (8) 
industries in NAICS Sector 51 (Information), ten (10) industries in 
NAICS Sector 52 (Finance and Insurance), and nine (9) industries in 
NAICS Sector 53 (Real Estate and Rental and Leasing). SBA's proposed 
revisions relied on its recently revised ``Size Standards Methodology'' 
(Methodology). SBA seeks comments on its proposed changes to size 
standards in the above sectors, and the data sources it evaluated to 
develop the proposed size standards.

DATES: SBA must receive comments to this proposed rule on or before 
December 1, 2020.

ADDRESSES: Identify your comments by RIN 3245-AG90 and submit them by 
one of the following methods: (1) Federal eRulemaking Portal: 
www.regulations.gov, following the instructions for submitting 
comments; or (2) Mail/Hand Delivery/Courier: Khem R. Sharma, Ph.D., 
Chief, Office of Size Standards, 409 Third Street SW, Mail Code 6530, 
Washington, DC 20416.
    SBA will post all comments to this proposed rule on 
www.regulations.gov. If you wish to submit confidential business 
information (CBI) as defined in the User Notice at www.regulations.gov, 
you must submit such information to U.S. Small Business Administration, 
Khem R. Sharma, Ph.D., Chief, Office of Size Standards, 409 Third 
Street SW, Mail Code 6530, Washington, DC 20416, or send an email to 
[email protected]. Highlight the information that you consider to 
be CBI and explain why you believe SBA should hold this information as 
confidential. SBA will review your information and determine whether it 
will make the information public.

FOR FURTHER INFORMATION CONTACT: Jorge Laboy-Bruno, Ph.D., Economist, 
Office of Size Standards, (202) 205-6618 or [email protected].

SUPPLEMENTARY INFORMATION: To determine eligibility for Federal small 
business assistance, SBA establishes small business size definitions 
(usually referred to as ``size standards'') for private sector 
industries in the United States. SBA uses two primary measures of 
business size for size standards purposes: Average annual receipts and 
average number of employees. SBA uses financial assets for certain 
financial industries in Sector 52 and refining capacity, in addition to 
employees, for the petroleum refining industry in Sector 31-33 to 
measure business size. In addition, SBA's Small Business Investment 
Company (SBIC), Certified Development Company (CDC/504), and 7(a) Loan 
Programs use either the industry-based size standards or the 
alternative size standards based on tangible net worth and net income 
to determine eligibility for those programs.
    In September 2010, Congress passed the Jobs Act (Pub. L. 111-240, 
124 Stat. 2504, September 27, 2010), (Jobs Act) requiring SBA to review 
all size standards every five years and make necessary adjustments to 
reflect current industry and market conditions. In accordance with the 
Jobs Act, in early 2016 SBA completed the first 5-year review of all 
size standards--except those for agricultural enterprises for which 
size standards were previously set by Congress--and made appropriate 
adjustments to size standards for a number of industries to reflect 
current industry and Federal market conditions.
    During the previous 5-year comprehensive review of size standards 
under the Jobs Act, SBA reviewed the receipts-based size standards for 
forty-two (42) industries and one (1) exception within NAICS Sector 48-
49, twenty (20) industries within Sector 51, thirty-nine (39) 
industries in Sector 52, and twenty-four (24) industries and one (1) 
exception in Sector 53. These reviews of receipts-based size standards 
occurred during October 2010 to December 2013. SBA's analysis of the 
then-available relevant industry and Federal contracting data supported 
lowering size standards for twenty-four (24) industries and one (1) 
exception in these sectors. However, taking into consideration economic 
conditions at the time, SBA decided to either retain these size 
standards at existing levels or bring them up to the relevant common 
size standard. In the final rules, SBA increased size standards for 
ninety-three (93) of those industries and one (1) exception, including 
twenty-two (22) industries in NAICS Sector 48-49 (77 FR 10943, February 
24, 2012), fifteen (15) industries in NAICS Sector 51 (77 FR 72702, 
December 6, 2012), thirty-six (36) industries in NAICS Sector 52 (78 FR 
37409, June 20, 2013), and twenty (20) industries and one (1) exception 
in NAICS Sector 53 (77 FR 58747, September 24, 2012). SBA changed the 
basis for measuring the size of one industry (NAICS code 522293, 
International Trade Financing) from assets to annual receipts. SBA 
retained the size standards for the remaining thirty-two (32) 
industries in these sectors. Table 1, Size Standards Revisions During 
the Prior Comprehensive Review, provides a summary of these revisions 
by NAICS sector.

                                         Table 1--Size Standards Revisions During the Prior Comprehensive Review
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                                                                                                                                          Number of type
                                                                          Number of size  Number of size  Number of size  Number of size      of size
             NAICS sector                         Sector name                standards       standards       standards       standards       standards
                                                                             reviewed        increased        lowered       maintained        changed
--------------------------------------------------------------------------------------------------------------------------------------------------------
48-49................................  Transportation and Warehousing...              43              22               0              21               0
51...................................  Information......................              20              15               0               5               0
52...................................  Finance and Insurance............              39              36               0               2               1
53...................................  Real Estate and Rental and                     25              21               0               4               0
                                        Leasing.
                                                                         -------------------------------------------------------------------------------
    All Sectors......................  .................................             127              94               0              32               1
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[[Page 62373]]

    Currently, there are twenty-seven (27) different size standards 
levels covering 1,023 NAICS industries and 14 subindustry activities 
(commonly known as ``exceptions'' in SBA's table of size standards). 
Sixteen (16) of these size levels are based on average annual receipts, 
nine (9) are based on average number of employees, and two (2) are 
based on other measures.
    SBA also adjusts its monetary-based size standards for inflation at 
least once every five years. An interim final rule on SBA's latest 
inflation adjustment to size standards, effective August 19, 2019, was 
published in the Federal Register on July 18, 2019 (84 FR 34261). SBA 
also updates its size standards, also every five years, to adopt the 
Office of Management and Budget's (OMB) quinquennial NAICS revisions to 
its table of small business size standards. Effective October 1, 2017, 
SBA adopted OMB's 2017 NAICS revisions for its size standards (82 FR 
44886, September 27, 2017).
    This proposed rule is one of a series of proposed rules that will 
review size standards of industries grouped by various NAICS sectors. 
Rather than review all size standards at one time, SBA is reviewing 
size standards by generally grouping industries within various NAICS 
sectors that use the same size measure (i.e., employees or monetary). 
In the current review, SBA will review size standards in six (6) groups 
of NAICS sectors. (In the prior review, SBA reviewed size standards 
mostly on a sector by sector basis.) Once SBA completes its review of 
size standards for a group of sectors, it issues for public comments a 
proposed rule to revise size standards for those industries based on 
the latest available data and other factors deemed relevant by the 
SBA's Administrator.
    Below is a discussion of SBA's revised ``Size Standards 
Methodology'' (Methodology), available at www.sba.gov/size, for 
establishing, reviewing, or modifying receipts-based size standards 
that SBA has applied to this proposed rule. SBA examines the structural 
characteristics of an industry as a basis to assess industry 
differences and the overall degree of competitiveness of an industry 
and of firms within the industry. Industry structure is typically 
examined by analyzing four primary factors--average firm size, degree 
of competition within an industry, start-up costs and entry barriers, 
and distribution of firms by size. To assess the ability of small 
businesses to compete for Federal contracting opportunities under the 
current size standards, as the fifth primary factor, SBA also examines, 
for each industry averaging $20 million or more in average annual 
Federal contract dollars, the small business share in Federal contract 
dollars relative to the small business share in total industry's 
receipts. When necessary, SBA also considers other secondary factors as 
they are relevant to the industries and the interests of small 
businesses, including impacts of size standards changes on small 
businesses.

Size Standards Methodology

    SBA has recently revised its Methodology for establishing, 
reviewing, or modifying size standards when necessary. See the 
notification in the April 11, 2019 issue of the Federal Register (84 FR 
14587). The revised methodology is available on SBA's size standards 
web page at www.sba.gov/size. Prior to finalizing the revised 
Methodology, SBA issued a notification in the April 27, 2018 issue of 
the Federal Register (83 FR 18468) to solicit comments from the public 
and notify stakeholders of the proposed changes to the Methodology. SBA 
considered all public comments in finalizing the revised Methodology. 
For a summary of comments and SBA's responses, refer to the SBA's April 
11, 2019 Federal Register notification.
    The revised Methodology represents a major change from the previous 
methodology, which was issued on October 21, 2009 (74 FR 53940). 
Specifically, in its revised Methodology SBA is replacing the 
``anchor'' approach applied in the previous methodology with a 
``percentile'' approach for evaluating differences in characteristics 
among various industries. Under the ``anchor'' approach, SBA generally 
evaluated the characteristics of individual industries relative to the 
average characteristics of industries with the anchor size standard to 
determine whether they should have a higher or a lower size standard 
than the anchor. In the ``percentile'' approach, SBA ranks each 
industry among all industries with the same measure of size standards 
(such as receipts or employees) in terms of four primary industry 
factors, discussed in the Industry Analysis subsection below. The 
``percentile'' approach is explained more fully elsewhere in this 
proposed rule. Additionally, as the fifth factor, SBA evaluates the 
difference between the small business share in Federal contract dollars 
and the small business share in total industry's receipts to compute 
the size standard for the Federal contracting factor. The overall size 
standard for an industry is then obtained by averaging all size 
standards supported by each primary factor. The evaluation of the 
Federal contracting factor is explained more fully elsewhere in this 
proposed rule.
    SBA does not apply all aspects of its Methodology to all proposed 
rules because not all features are relevant for every industry covered 
by each proposed rule. For example, since all industries covered by 
this proposed rule have receipts-based size standards, the Methodology 
described in this proposed rule applies only to establishing, 
reviewing, or modifying receipts-based size standards. SBA's entire 
Methodology is available on its website at www.sba.gov/size.
    This proposed rule includes information regarding the factors SBA 
evaluated and the criteria it used to propose adjustments to size 
standards for industries reviewed herein. This proposed rule also 
affords the public an opportunity to review and to comment on SBA's 
proposed revisions to size standards for industries covered by the 
rule.

Industry Analysis

    Congress granted SBA's Administrator discretion to establish 
detailed small business size standards (15 U.S.C. 632(a)(2)). 
Specifically, Section 3(a)(3) of the Small Business Act (15 U.S.C. 
632(a)(3)) requires that ``. . . the [SBA] Administrator shall ensure 
that the size standard varies from industry to industry to the extent 
necessary to reflect the differing characteristics of the various 
industries and consider other factors deemed to be relevant by the 
Administrator.'' Accordingly, the economic structure of an industry is 
the underlying basis for establishing, reviewing, or modifying small 
business size standards. In addition, SBA considers current economic 
conditions, its mission and program objectives, the Administration's 
current policies, impacts on small businesses under current and 
proposed or revised size standards, suggestions from industry groups 
and Federal agencies, and public comments on the proposed rule. SBA 
also examines whether a size standard based on industry and other 
relevant data successfully excludes businesses that are dominant in the 
industry.
    The goal of SBA's size standards review is to determine whether its 
existing small business size standards reflect the current industry 
structure and Federal market conditions and revise them, when the 
latest available data suggest that revisions are warranted. In the 
past, SBA compared the characteristics of each industry with the 
average characteristics of a group of industries associated with the 
``anchor'' size standard. For example, in the

[[Page 62374]]

recently completed first 5-year comprehensive review of size standards 
under the Jobs Act, $7 million (now $8.0 million due to the inflation 
adjustment in 2019; see 84 FR 34261 (July 18, 2019)) was considered the 
``anchor'' for receipts-based size standards and 500 employees was the 
``anchor'' for employee-based size standards. If the characteristics of 
a specific industry under review were similar to the average 
characteristics of industries in the anchor group, SBA generally 
adopted the anchor size standard for that industry. If the specific 
industry's characteristics were significantly different from those in 
the anchor group, SBA assigned a size standard that was higher or lower 
than the anchor. To determine a size standard above or below the anchor 
size standard, SBA evaluated the characteristics of a second comparison 
group of industries with higher size standards. For industries with 
receipts-based standards, the second comparison group consisted of 
industries with size standards between $23 million and $35.5 million, 
with the weighted average size standard for the group equaling $29 
million. For manufacturing industries and other industries with 
employee-based size standards (except for Wholesale Trade and Retail 
Trade), the second comparison group included industries with a size 
standard of 1,000 employees or 1,500 employees, with the weighted 
average size standard of 1,323 employees. Using the anchor size 
standard and average size standard for the second comparison group, SBA 
computed a size standard for an industry's characteristic (factor) 
based on the industry's position for that factor relative to the 
average values of the same factor for industries in the anchor and 
second comparison groups.
    Under the ``percentile'' approach, for each industry factor, an 
industry is ranked and compared with the 20th percentile and 80th 
percentile values of that factor among the industries sharing the same 
measure of size standards (i.e., receipts or employees). Combining that 
result with the 20th percentile and 80th percentile values of size 
standards among the industries with the same measure of size standards, 
SBA computes a size standard supported by each industry factor for each 
industry. In the previous Methodology, comparison industry groups were 
predetermined independent of the data, while in the revised Methodology 
they are established using the actual data. A more detailed description 
of the percentile method is provided in SBA's Methodology, available at 
www.sba.gov/size.
    The primary factors that SBA evaluates to examine industry 
structure include average firm size, startup costs and entry barriers, 
industry competition, and distribution of firms by size. SBA also 
evaluates, as an additional primary factor, small business success in 
receiving Federal contracting assistance under the current size 
standards. Specifically, for the Federal contracting factor, SBA 
examines the small business share of Federal contract dollars relative 
to small business share of total receipts within an industry. These 
are, generally, the five most important factors SBA examines when 
establishing, reviewing, or revising a size standard for an industry. 
However, SBA will also consider and evaluate other secondary factors 
that it believes are relevant to a particular industry (such as 
technological changes, growth trends, SBA financial assistance, other 
program factors, etc.). SBA also considers possible impacts of size 
standard revisions on eligibility for Federal small business 
assistance, current economic conditions, the Administration's policies, 
and suggestions from industry groups and Federal agencies. Public 
comments on proposed rules also provide important additional 
information. SBA thoroughly reviews all public comments before making a 
final decision on its proposed revisions to size standards. Below are 
brief descriptions of each of the five primary factors that SBA has 
evaluated for each industry being reviewed in this proposed rule. A 
more detailed description of this analysis is provided in the SBA's 
Methodology, available at www.sba.gov/size.
    1. Average firm size. SBA computes two measures of average firm 
size: Simple average and weighted average. For industries with 
receipts-based size standards, the simple average is the total receipts 
of the industry divided by the total number of firms in the industry. 
The weighted average firm size is the summation of all the receipts of 
the firms in an industry multiplied by their share of receipts in the 
industry. The simple average weighs all firms within an industry 
equally regardless of their size. The weighted average overcomes that 
limitation by giving more weight to larger firms. The size standard 
supported by average firm size is obtained by averaging size standards 
supported by simple average firm size and weighted average firm size.
    If the average firm size of an industry is higher than the average 
firm size for most other industries, this would generally support a 
size standard higher than the size standards for other industries. 
Conversely, if the industry's average firm size is lower than that of 
most other industries, it would provide a basis to assign a lower size 
standard as compared to size standards for most other industries.
    2. Startup costs and entry barriers. Startup costs reflect a firm's 
initial size in an industry. New entrants to an industry must have 
sufficient capital and other assets to start and maintain a viable 
business. If firms entering an industry under review have greater 
capital requirements than firms do in most other industries, all other 
factors remaining the same, this would be a basis for a higher size 
standard. Conversely, if the industry has smaller capital needs 
compared to most other industries, a lower size standard would be 
considered appropriate.
    Given the lack of actual data on startup costs and entry barriers 
by industry, SBA uses average assets as a proxy of startup costs and 
entry barriers. To calculate average assets, SBA begins with the sales 
to total assets ratio for an industry from the Risk Management 
Association's Annual Statement Studies, available at https://rmau.org/. 
SBA then applies these ratios to the average receipts of firms in that 
industry obtained from the Economic Census tabulation. An industry with 
average assets that are significantly higher than most other industries 
is likely to have higher startup costs; this in turn will support a 
higher size standard. Conversely, an industry with average assets that 
are similar to or lower than most other industries is likely to have 
lower startup costs; this will support either lowering or maintaining 
the size standard.
    3. Industry competition. Industry competition is generally measured 
by the share of total industry receipts generated by the largest firms 
in an industry. SBA generally evaluates the share of industry receipts 
generated by the four largest firms in each industry. This is referred 
to as the ``4-firm concentration ratio,'' a commonly used economic 
measure of market competition. Using the 4-firm concentration ratio, 
SBA compares the degree of concentration within an industry to the 
degree of concentration of the other industries with the same measure 
of size standards. If a significantly higher share of economic activity 
within an industry is concentrated among the four largest firms 
compared to most other industries, all else being equal, SBA would set 
a size standard that is relatively higher than for most other

[[Page 62375]]

industries. Conversely, if the market share of the four largest firms 
in an industry is appreciably lower than the similar share for most 
other industries, the industry will be assigned a size standard that is 
lower than those for most other industries.
    4. Distribution of firms by size. SBA examines the shares of 
industry total receipts accounted for by firms of different receipts 
and employment sizes in an industry. This is an additional factor SBA 
considers in assessing competition within an industry besides the 4-
firm concentration ratio. If the preponderance of an industry's 
economic activity is attributable to smaller firms, this generally 
indicates that small businesses are competitive in that industry and 
would support adopting a smaller size standard. A higher size standard 
would be supported for an industry in which the distribution of firms 
indicates that most of the economic activity is concentrated among the 
larger firms.
    Concentration is a measure of inequality of distribution. To 
determine the degree of inequality of distribution in an industry, SBA 
computes the Gini coefficient, using the Lorenz curve. The Lorenz curve 
presents the cumulative percentages of units (firms) along the 
horizontal axis and the cumulative percentages of receipts (or other 
measures of size) along the vertical axis. (For further detail, see 
SBA's Methodology on its website at www.sba.gov/size.) Gini coefficient 
values vary from zero to one. If receipts are distributed equally among 
all the firms in an industry, the value of the Gini coefficient will 
equal zero. If an industry's total receipts are attributed to a single 
firm, the Gini coefficient will equal one.
    SBA compares the degree of inequality of distribution for an 
industry under review with other industries with the same type of size 
standards. If an industry shows a higher degree of inequality of 
distribution (hence a higher Gini coefficient value) compared to most 
other industries in the group this would, all else being equal, warrant 
a size standard that is higher than the size standards assigned to most 
other industries. Conversely, an industry with lower degree of 
inequality (i.e., a lower Gini coefficient value) than most others will 
be assigned a lower size standard relative to others.
    5. Federal contracting. As the fifth factor, SBA examines the 
success small businesses are having in winning Federal contracts under 
the current size standard as well as the possible impact a size 
standard change may have on Federal small business contracting 
opportunities. The Small Business Act requires the Federal government 
to ensure that small businesses receive a ``fair share'' of Federal 
contracts. The legislative history also discusses the importance of 
size standards in Federal contracting. To incorporate the Federal 
contracting factor in the size standards analysis, SBA evaluates small 
business participation in Federal contracting in terms of the share of 
total Federal contract dollars awarded to small businesses relative to 
the small business share of industry's total receipts. In general, if 
the share of Federal contract dollars awarded to small businesses in an 
industry is significantly smaller than the small business share of 
total industry's receipts, all else remaining the same, a justification 
would exist for considering a size standard higher than the current 
size standard. In cases where small business share of the Federal 
market is already appreciably high relative to the small business share 
of the overall market, SBA generally assumes that the existing size 
standard is adequate with respect to the Federal contracting factor.
    The disparity between the small business Federal market share and 
industry-wide small business share may be due to various factors, such 
as extensive administrative and compliance requirements associated with 
Federal contracts, the different skill set required to perform Federal 
contracts as compared to typical commercial contracting work, and the 
size of Federal contracts. These, as well as other factors, are likely 
to influence the type of firms within an industry that compete for 
Federal contracts. By comparing the small business Federal contracting 
share with the industry-wide small business share, SBA includes in its 
size standards analysis the latest Federal market conditions. Besides 
the impact on Federal contracting, SBA also examines impacts on SBA's 
loan programs both under the current and revised size standards.

Sources of Industry and Program Data

    SBA's primary source of industry data used in this proposed rule is 
a special tabulation of the Economic Census from the U.S. Census Bureau 
(www.census.gov/econ/census). The tabulation based on the 2012 Economic 
Census is the latest available, which SBA used for evaluating industry 
characteristics and developing size standards in this proposed rule. 
The special tabulation provides industry data on the number of firms, 
number of establishments, number of employees, annual payroll, and 
annual receipts of companies by Industry (6-digit level), Industry 
Group (4-digit level), Subsector (3-digit level), and Sector (2-digit 
level). These data are arrayed by various classes of firms' size based 
on the overall number of employees and receipts of the entire 
enterprise (all establishments and affiliated firms) from all 
industries. The special tabulation also contains information for 
different levels of NAICS categories on average and median firm size in 
terms of both receipts and employment, total receipts generated by the 
four and eight largest firms, the Herfindahl-Hirschman Index (HHI), the 
Gini coefficient, and size distributions of firms by various receipts 
and employment size groupings.
    In some cases, where data were not available due to disclosure 
prohibitions in the Census Bureau's tabulation, SBA either estimated 
missing values using available relevant data or examined data at a 
higher level of industry aggregation, such as at the NAICS 2-digit 
(Sector), 3-digit (Subsector), or 4-digit (Industry Group) level. In 
some instances, SBA's analysis was based only on those factors for 
which data were available or estimates of missing values were possible.
    To evaluate some industries that are not covered by the Economic 
Census, SBA used a similar special tabulation of the latest County 
Business Patterns (CBP) published by the U.S. Census Bureau 
(www.census.gov/programs-surveys/cbp.html). Similarly, to evaluate 
industries in NAICS Sector 11 that are also not covered by the Economic 
Census and CBP, SBA evaluated a similar special tabulation based on the 
2012 Census of Agriculture (www.nass.usda.gov) from the National 
Agricultural Statistics Service (NASS). Besides the Economic Census, 
Agricultural Census and CBP tabulations, SBA also evaluates relevant 
industry data from other sources, when necessary, especially for 
industries that are not covered by the Economic Census or CBP. These 
include the Quarterly Census of Employment and Wages (QCEW, also known 
as ES-202 data) (www.bls.gov/cew/) and Business Employment Dynamics 
(BED) data (www.bls.gov/bdm/) from the U.S. Bureau of Labor Statistics. 
Similarly, to evaluate certain financial industries that have assets-
based size standards SBA examines the data from the Statistics on 
Depository Institutions (SDI) database (www5.fdic.gov/sdi/main.asp) of 
the Federal Deposit Insurance Corporation (FDIC) data. Finally, to 
evaluate the capacity component of the Petroleum Refiners (NAICS 
324110) size standard, SBA evaluates the petroleum production data from 
the Energy

[[Page 62376]]

Information Administration (www.eia.gov).
    To calculate average assets, SBA used sales to total assets ratios 
from the Risk Management Association's Annual eStatement Studies, 2016-
2018 (https://rmau.org). To evaluate Federal contracting trends and 
evaluate one exception in Sector 48-49 and one exception in Sector 53, 
SBA examined the data on Federal prime contract awards from the Federal 
Procurement Data System--Next Generation (FPDS-NG) (www.fpds.gov) for 
fiscal years 2016-2018. To assess the impact on financial assistance to 
small businesses, SBA examined its internal data on 7(a) and 504 loan 
programs for fiscal years 2016-2018. For some portion of impact 
analysis, SBA also evaluated the data from the System of Award 
Management (www.sam.gov).
    Data sources and estimation procedures SBA uses in its size 
standards analysis are documented in detail in SBA's Methodology, which 
is available at www.sba.gov/size.

Dominance in Field of Operation

    Section 3(a) of the Small Business Act (15 U.S.C. 632(a)) defines a 
small business concern as one that is: (1) Independently owned and 
operated; (2) not dominant in its field of operation; and (3) within a 
specific small business definition or size standard established by SBA 
Administrator. SBA considers as part of its evaluation whether a 
business concern at a proposed size standard would be dominant in its 
field of operation. For this, SBA generally examines the industry's 
market share of firms at the proposed or revised size standard as well 
as the distribution of firms by size. Market share and size 
distribution may indicate whether a firm can exercise a major 
controlling influence on a national basis in an industry where a 
significant number of business concerns are engaged. If a contemplated 
size standard includes a dominant firm, SBA will consider a lower size 
standard to exclude the dominant firm from being defined as small.

Selection of Size Standards

    In the Methodology SBA applied to the first 5-year comprehensive 
review of size standards, SBA adopted a fixed number of size standards 
levels as part of its effort to simplify size standards. In response to 
public comments to the 2009 Methodology white paper, and the 2013 
amendment to the Small Business Act (section 3(a)(8)) under section 
1661 for the National Defense Authorization Act of Fiscal Year 2013 
(``NDAA 2013'') (Public Law 112-239, January 2, 2013), in the revised 
Methodology, SBA has relaxed the limitation on the number of small 
business size standards. Specifically, section 1661 of NDAA 2013 states 
``SBA cannot limit the number of size standards, and shall assign the 
appropriate size standard to each industry identified by NAICS.''
    In the revised Methodology, which is used in the ongoing, second 5-
year review of size standards, SBA calculates a separate size standard 
to each NAICS industry. However, to account for errors and limitations 
associated with various data SBA evaluates in the size standards 
analysis, SBA will round the calculated size standard value for a 
receipts-based size standard to the nearest $500,000, except for 
agricultural industries in Subsectors 111 and 112 for which the 
calculated size standards will be rounded to the nearest $250,000. This 
rounding procedure will be applied both in calculating a size standard 
for each of the five primary factors and in calculating the overall 
size standard for the industry.
    As a policy decision, SBA will continue to maintain the minimum and 
maximum levels for both receipts-based and employee-based size 
standards. Accordingly, SBA will not generally propose or adopt a size 
standard that is either below the minimum level or above the maximum, 
even though the calculations yield values below the minimum or above 
the maximum. The minimum size standard reflects the size an established 
small business should be to have adequate capabilities and resources to 
be able to compete for and perform Federal contracts (but does not 
account for small businesses that are newly formed or just starting 
operations). On the other hand, the maximum size standard represents 
the level above which businesses, if qualified as small, would 
outcompete much smaller businesses when accessing Federal assistance.
    With respect to receipts-based size standards, SBA has established 
$6 million and $41.5 million, respectively, as the minimum and maximum 
size standard levels (except for most agricultural industries in NAICS 
Subsectors 111 and 112). These levels reflect the current minimum of 
$6.0 million and the current maximum of $41.5 million. The industry 
data seems to suggest that $6 million minimum and $41.5 million maximum 
size standards would be too high for agricultural industries.

Evaluation of Industry Factors

    As mentioned earlier, to assess the appropriateness of the current 
size standards SBA evaluates the structure of each industry in terms of 
four economic characteristics or factors, namely average firm size, 
average assets size as a proxy of startup costs and entry barriers, the 
4-firm concentration ratio as a measure of industry competition, and 
size distribution of firms using the Gini coefficient. For each size 
standard type (i.e., receipts-based or employee-based) SBA ranks 
industries both in terms of each of the four industry factors and in 
terms of the existing size standard and computes the 20th percentile 
and 80th percentile values for both. SBA then evaluates each industry 
by comparing its value for each industry factor to the 20th percentile 
and 80th percentile values for the corresponding factor for industries 
under a particular type of size standard.
    If the characteristics of an industry under review within a 
particular size standard type are similar to the average 
characteristics of industries within the same size standard type in the 
20th percentile, SBA will consider adopting as an appropriate size 
standard for that industry the 20th percentile value of size standards 
for those industries. For each size standard type, if the industry's 
characteristics are similar to the average characteristics of 
industries in the 80th percentile, SBA will assign a size standard that 
corresponds to the 80th percentile in the size standard rankings of 
industries. A separate size standard is established for each factor 
based on the amount of differences between the factor value for an 
industry under a particular size standard type and 20th percentile and 
80th percentile values for the corresponding factor for all industries 
in the same type. Specifically, the actual level of the new size 
standard for each industry factor is derived by a linear interpolation 
using the 20th percentile and 80th percentile values of that factor and 
corresponding percentiles of size standards. Each calculated size 
standard is bounded between the minimum and maximum size standards 
levels, as discussed before. As noted earlier, the calculated value for 
a receipts-based size standard for each industry factor is rounded to 
the nearest $500,000, except for industries in Subsectors 111 and 112 
for which a calculated size standard is rounded to the nearest 
$250,000.
    Table 2, 20th and 80th Percentiles of Industry Factors for 
Receipts-Based Size Standards, shows the 20th percentile and 80th 
percentile values for average firm size (simple and weighted), average 
assets size, 4-firm concentration ratio, and Gini coefficient for 
industries with receipts based size standards.

[[Page 62377]]



                                Table 2--20th and 80th Percentiles of Industry Factors for Receipts-Based Size Standards
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                          Weighted
                                                                     Simple average   average receipts   Average assets       4-firm           Gini
                      Industries/percentiles                          receipts size       size  ($          size  ($       concentration    coefficient
                                                                       ($ million)        million)          million)        ratio  (%)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Industries, excluding Subsectors 111 and 112
    20th percentile...............................................              0.83             19.42              0.34             7.9           0.686
    80th percentile...............................................              7.52            830.65              5.19            42.4           0.834
Industries in Subsectors 111 and 112
    20th percentile...............................................              0.06              1.48              0.07             1.7           0.608
    80th percentile...............................................              0.83             13.32              0.88            12.3           0.908
--------------------------------------------------------------------------------------------------------------------------------------------------------

Estimation of Size Standards Based on Industry Factors

    An estimated size standard supported by each industry factor is 
derived by comparing its value for a specific industry to the 20th 
percentile and 80th percentile values for that factor. If an industry's 
value for a particular factor is near the 20th percentile value in the 
distribution, the supported size standard will be one that is close to 
the 20th percentile value of size standards for industries in the size 
standards group, which is $8.0 million. If a factor for an industry is 
close to the 80th percentile value of that factor, it would support a 
size standard that is close to the 80th percentile value in the 
distribution of size standards, which is $35.0 million. For a factor 
that is within, above, or below the 20-80th percentile range, the size 
standard is calculated using linear interpolation based on the 20th 
percentile and 80th percentile values for that factor and the 20th 
percentile and 80th percentile values of size standards.
    For example, if an industry's simple average receipts are $1.9 
million that would support a size standard of $11.5 million. According 
to Table 2, the 20th percentile and 80th percentile values of average 
receipts are $0.83 million and $7.52 million, respectively. The $1.9 
million is 15.9 percent between the 20th percentile value ($0.83 
million) and the 80th percentile value ($7.52 million) of simple 
average receipts (($1.9 million-$0.83 million) / ($7.52 million-$0.83 
million) = 0.159 or 15.9%). Applying this percentage to the difference 
between the 20th percentile value ($8 million) and 80th percentile 
($35.0 million) value of size standards and then adding the result to 
the 20th percentile size standard value ($8.0 million) yields a 
calculated size standard value of $12.32 million ([{$35.0 million-$8.0 
million{time}  * 0.159] + $8.0 million = $12.32 million). The final 
step is to round the calculated $12.32 million size standard to the 
nearest $500,000, which in this example yields $12.5 million. This 
procedure is applied to calculate size standards supported by other 
industry factors.
    Detailed formulas involved in these calculations are presented in 
SBA's Methodology, which is available on its website at www.sba.gov/size.

Derivation of Size Standards Based on Federal Contracting Factor

    Besides industry structure, SBA also evaluates Federal contracting 
data to assess the success of small businesses in getting Federal 
contracts under the existing size standards. For each industry with $20 
million or more in annual Federal contract dollars, SBA evaluates the 
small business share of total Federal contract dollars relative to the 
small business share of total industry receipts. All other factors 
being equal, if the share of Federal contracting dollars awarded to 
small businesses in an industry is significantly less than the small 
business share of that industry's total receipts, a justification would 
exist for considering a size standard higher than the current size 
standard. Conversely, if the small business share of Federal 
contracting activity is near or above the small business share in total 
industry receipts, this will support the current size standard.
    SBA increases the existing size standards by certain percentages 
when the small business share of total industry receipts exceeds the 
small business share of total Federal contract dollars by 10 or more 
percentage points. Proposed percentage increases generally reflect 
receipts levels needed to bring the small business share of Federal 
contracts at par with the small business share of industry receipts. 
These proposed percentage increases for receipts-based size standards 
are given in Table 3, Proposed Adjustments to Size Standards Based on 
Federal Contracting Factor.

               Table 3--Proposed Adjustments to Size Standards Based on Federal Contracting Factor
----------------------------------------------------------------------------------------------------------------
                                        Percentage difference between the small business shares of total Federal
                                             contract dollars in an industry and of total industry receipts
            Size standards            --------------------------------------------------------------------------
                                                >-10%                 -10% to -30%                <-30%
----------------------------------------------------------------------------------------------------------------
Receipts based standards
    <$15 million.....................  No change..............  Increase 30%...........  Increase 60%
    $15 million to <$25 million......  No change..............  Increase 20%...........  Increase 40%
    $25 million to <$41.5 million....  No change..............  Increase 15%...........  Increase 25%
----------------------------------------------------------------------------------------------------------------

    For example, if an industry with the current size standard of $8.0 
million had an average of $50 million in Federal contracting dollars, 
of which 15 percent went to small businesses, and if that small 
businesses accounted for 40 percent of total receipts of that industry, 
the small business share of total Federal contract dollars would be 25 
percent less than the small business share of total industry receipts 
(40%-15%). According to the above rule, the new size standard for the 
Federal contracting factor for that industry would be set by 
multiplying the current $8.0 million standard by 1.3 (i.e., 30% 
increase) and then by rounding the result to the nearest $500,000, 
yielding a size standard of $10.5 million. SBA evaluated the small 
business share of total Federal contract dollars for fifty-six

[[Page 62378]]

(56) industries (including 23 in Sector 48-49, seven (7) in Sector 51, 
12 in Sector 52, and 14 in Sector 53) covered by this proposed rule 
which had $20 million or more in average annual Federal contract 
dollars during fiscal years 2016-2018. The Federal contracting factor 
was significant (i.e., the difference between the small business share 
of total industry receipts and small business share of Federal 
contracting dollars was 10 percentage points or more) in eighteen (18) 
of these industries, prompting an upward adjustment of their existing 
size standards based on that factor. For the remaining 38 industries 
that averaged $20 million or more in average annual contract dollars, 
the Federal contracting factor was not significant, and the existing 
size standard was applied for that factor.

Derivation of Overall Industry Size Standard

    The SBA's Methodology presented above results in five separate size 
standards based on evaluation of the five primary factors (i.e., four 
industry factors and one Federal contracting factor). SBA typically 
derives an industry's overall size standard by assigning equal weights 
to size standards supported by each of these five factors. However, if 
necessary, SBA's Methodology would allow assigning different weights to 
some of these factors in response to its policy decisions and other 
considerations. For detailed calculations, see SBA's Methodology, 
available at www.sba.gov/size.

Calculated Size Standards Based on Industry and Federal Contracting 
Factors

    Table 4, Size Standards Supported by Each Factor for Each Industry 
(Receipts), below, shows the results of analyses of industry and 
Federal contracting factors for each industry and subindustry 
(exception) covered by this proposed rule. NAICS industries in columns 
2, 3, 4, 5, 6, 7, and 8 show two numbers. The upper number is the value 
for the industry or Federal contracting factor shown on the top of the 
column and the lower number is the size standard supported by that 
factor. Column 9 shows a calculated new size standard for each 
industry. This is the average of the size standards supported by each 
factor, rounded to the nearest $500,000 for non-agriculture industries 
and rounded to the nearest $250,000 for agriculture industries. 
Analytical details involved in the averaging procedure are described in 
SBA's Methodology, which is available at www.sba.gov/size. For 
comparison with the calculated new size standards, the current size 
standards are in column 10 of Table 4.

                                      Table 4--Size Standards Supported by Each Factor for Each Industry (Receipts)
                                        [Upper value = calculated factor, lower value = size standard supported]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                           Simple     Weighted                                                    Calculated    Current
                                                           average     average     Average                              Federal      size        size
  NAICS code NAICS industry title           Type          firm size   firm size    assets     Four-firm      Gini      contract    standard    standard
                                                             ($          ($       size  ($   ratio  (%)  coefficient    factor        ($          ($
                                                          million)    million)    million)                                (%)      million)    million)
(1)                                  (2)...............         (3)         (4)         (5)         (6)          (7)         (8)         (9)        (10)
--------------------------------------------------------------------------------------------------------------------------------------------------------
481219 Other Nonscheduled Air        Factor............        $3.6       $76.4        $2.2        36.8        0.803        -8.2       $22.0       $16.5
 Transportation.                     Size Std..........        19.0        10.0        18.5        30.5         29.5        16.5
484110 General Freight Trucking,     Factor............         0.9        10.7         0.3         1.8        0.717  ..........         9.0        30.0
 Local.                              Size Std..........         8.5         7.5         8.0         6.0         14.0
484121 General Freight Trucking,     Factor............         3.5       734.6         1.6        14.5        0.827  ..........        22.0        30.0
 Long-Distance, Truckload.           Size Std..........        19.0        32.0        15.0        13.0         33.5
484122 General Freight Trucking,     Factor............        10.2     2,209.7         4.9        41.8        0.882  ..........        38.0        30.0
 Long-Distance, Less Than Truckload. Size Std..........        41.5        41.5        33.5        34.5         41.5
484210 Used Household and Office     Factor............         1.9       309.3         0.7        26.1        0.791        15.0        21.0        30.0
 Goods Moving.                       Size Std..........        12.5        17.5        10.0        22.0         27.0        30.0
484220 Specialized Freight (except   Factor............         1.2        30.7         0.5         3.9        0.733       -29.2        15.0        30.0
 Used Goods) Trucking, Local.        Size Std..........         9.5         8.5         9.0         6.0         16.5        34.5
484230 Specialized Freight (except   Factor............         4.4       201.1         2.3        11.1        0.822        10.6        22.0        30.0
 Used Goods) Trucking, Long-         Size Std..........        22.0        14.0        19.0        10.5         32.5        30.0
 Distance.
485111 Mixed Mode Transit Systems..  Factor............         6.5  ..........         3.6  ..........  ...........       -23.7        25.5        16.5
                                     Size Std..........        31.0                    26.0                                 20.0
485112 Commuter Rail Systems.......  Factor............       117.7  ..........        65.4  ..........  ...........  ..........        41.5        16.5
                                     Size Std..........        41.5                    41.5
485113 Bus and Other Motor Vehicle   Factor............         5.3       323.4         3.0        56.1        0.858        49.1        28.5        16.5
 Transit Systems.                    Size Std..........        26.0        18.0        22.5        41.5         39.0        16.5
485119 Other Urban Transit Systems.  Factor............        15.7       157.6         8.7  ..........        0.811  ..........        33.0        16.5
                                     Size Std..........        41.5        12.5        41.5                     30.5
485210 Interurban and Rural Bus      Factor............         3.7       120.3         3.1        51.5        0.817  ..........        28.0        16.5
 Transportation.                     Size Std..........        19.5        11.5        23.0        41.5         32.0
485310 Taxi Service................  Factor............         0.8        20.6         0.3        11.8        0.781  ..........        13.0        16.5
                                     Size Std..........         8.0         8.0         8.0        11.0         25.0
485320 Limousine Service...........  Factor............         0.9        29.5         0.4        12.1        0.759  ..........        12.5        16.5
                                     Size Std..........         8.5         8.5         8.0        11.0         21.5
485410 School and Employee Bus       Factor............         3.4       834.1         2.2        41.4        0.823       -14.2        26.5        16.5
 Transportation.                     Size Std..........        18.0        35.0        18.5        34.5         33.0        20.0
485510 Charter Bus Industry........  Factor............         2.4        28.1         1.9        14.3        0.701  ..........        13.0        16.5
                                     Size Std..........        14.5         8.5        16.5        13.0         11.0
485991 Special Needs Transportation  Factor............         1.4        42.0         0.5        15.0        0.730        24.2        13.0        16.5
                                     Size Std..........        10.0         9.0         9.0        13.5         16.0        16.5
485999 All Other Transit and Ground  Factor............         1.1        28.8         0.5        22.9        0.787         1.4        16.0        16.5
 Passenger Transportation.           Size Std..........         9.0         8.5         9.0        20.0         26.5        16.5
486210 Pipeline Transportation of    Factor............       183.9     1,264.9        73.6        34.5        0.833  ..........        36.5        30.0
 Natural Gas.                        Size Std..........        41.5        41.5        41.5        29.0         34.5
486990 All Other Pipeline            Factor............        21.4        80.7         8.6        93.0        0.737  ..........        31.5        40.5
 Transportation.                     Size Std..........        41.5        10.0        41.5        41.5         17.5
487110 Scenic and Sightseeing        Factor............         1.8        36.7         1.1        32.1        0.763  ..........        18.0         8.0
 Transportation, Land.               Size Std..........        12.0         8.5        12.0        27.0         22.0

[[Page 62379]]

 
487210 Scenic and Sightseeing        Factor............         0.9        18.8         0.7        16.4        0.735  ..........        12.5         8.0
 Transportation, Water.              Size Std..........         8.5         8.0        10.0        14.5         17.0
487990 Scenic and Sightseeing        Factor............         2.5        30.0         1.5        44.1        0.781  ..........        22.0         8.0
 Transportation, Other.              Size Std..........        15.0         8.5        14.5        36.5         25.5
488111 Air Traffic Control.........  Factor............        20.5        64.0        12.8        90.7        0.691         0.1        30.5        35.0
                                     Size Std..........        41.5         9.5        41.5        41.5          9.0        35.0
488119 Other Airport Operations....  Factor............         5.5       129.3         3.5        22.6        0.798        -1.0        25.5        35.0
                                     Size Std..........        27.0        11.5        25.5        19.5         28.5        35.0
488190 Other Support Activities for  Factor............         5.3       273.2         2.9        18.7        0.839       -21.3        27.5        35.0
 Air Transportation.                 Size Std..........        26.0        16.5        22.5        16.5         36.0        40.5
488210 Support Activities for Rail   Factor............         9.7       159.1         5.7        29.8        0.807  ..........        30.0        16.5
 Transportation.                     Size Std..........        41.5        12.5        37.5        25.0         30.0
488310 Port and Harbor Operations..  Factor............         8.2       230.4         9.1        56.1        0.850        21.3        38.0        41.5
                                     Size Std..........        37.5        15.0        41.5        41.5         38.0        41.5
488320 Marine Cargo Handling.......  Factor............        34.2       680.6        34.2        49.1        0.837        -7.4        39.0        41.5
                                     Size Std..........        41.5        30.0        41.5        40.0         35.5        41.5
488330 Navigational Services to      Factor............         4.4        68.4         3.6        22.6        0.806       -32.6        26.5        41.5
 Shipping.                           Size Std..........        22.5         9.5        26.5        19.5         30.0        41.5
488390 Other Support Activities for  Factor............         2.7        41.4         2.1        23.0        0.791       -19.9        23.5        41.5
 Water Transportation.               Size Std..........        15.5         8.5        17.5        20.0         27.0        41.5
488410 Motor Vehicle Towing........  Factor............         0.6         4.7         0.3         4.1        0.620  ..........         7.0         8.0
                                     Size Std..........         7.0         7.5         7.5         6.0          6.0
488490 Other Support Activities for  Factor............         1.8        55.8         0.8        24.9        0.794       -16.3        16.0         8.0
 Road Transportation.                Size Std..........        12.0         9.0        10.5        21.5         27.5        10.5
488510 Freight Transportation        Factor............         3.4       254.1         0.8        11.0        0.787       -39.0        17.5        16.5
 Arrangement.                        Size Std..........        18.0        16.0        10.5        10.5         26.5        23.0
488510 Exception, Non[dash]Vessel    Factor............          NA          NA          NA          NA           NA  ..........        30.0        30.0
 Owning Common Carriers and          Size Std..........          NA          NA          NA          NA           NA
 Household Goods Forwarders.
488991 Packing and Crating.........  Factor............         1.5        22.5         0.6        15.8        0.752       -22.1        17.5        30.0
                                     Size Std..........        11.0         8.0         9.0        14.0         20.0        34.5
488999 All Other Support Activities  Factor............        13.2        48.2         4.7  ..........  ...........         0.5        22.0         8.0
 for Transportation.                 Size Std..........        41.5         9.0        32.5                                  8.0
491110 Postal Service (Necessary     Factor............          NA          NA          NA          NA           NA  ..........         8.0         8.0
 data not available to estimate the  Size Std..........          NA          NA          NA          NA           NA
 the factor and supported size
 standard).
492210 Local Messengers and Local    Factor............         0.8        22.4         0.2        12.4        0.725  ..........        10.5        30.0
 Delivery.                           Size Std..........         8.0         8.0         7.5        11.5         15.0
493110 General Warehousing and       Factor............         3.5       444.9         2.1        22.6        0.842        21.3        25.0        30.0
 Storage.                            Size Std..........        19.0        22.0        17.5        19.5         36.5        30.0
493120 Refrigerated Warehousing and  Factor............         6.4       237.4         7.1        38.1        0.798       -17.6        32.0        30.0
 Storage.                            Size Std..........        30.5        15.5        41.5        31.5         28.5        34.5
493130 Farm Product Warehousing and  Factor............         2.1        13.5         1.2        19.1        0.723  ..........        13.5        30.0
 Storage.                            Size Std..........        13.0         8.0        12.5        16.5         14.5
493190 Other Warehousing and         Factor............         4.9       592.7         2.6        50.7        0.867        14.1        32.0        30.0
 Storage.                            Size Std..........        24.5        27.0        20.5        41.5         41.0        30.0
511210 Software Publishers.........  Factor............        29.1    11,979.9        24.2        41.4        0.871        17.9        40.0        41.5
                                     Size Std..........        41.5        41.5        41.5        34.0         41.5        41.5
512110 Motion Picture and Video      Factor............         4.6     3,814.6         2.2        46.4        0.865        75.4        33.0        35.0
 Production.                         Size Std..........        23.0        41.5        18.0        38.0         40.5        35.0
512120 Motion Picture and Video      Factor............         4.5       107.2         3.0        38.3        0.814  ..........        26.0        34.5
 Distribution.                       Size Std..........        22.5        11.0        22.5        32.0         31.5
512131 Motion Picture Theaters       Factor............         7.0     1,303.2         6.4        55.7        0.848  ..........        39.5        41.5
 (except Drive-Ins).                 Size Std..........        33.0        41.5        41.5        41.5         37.5
512132 Drive-In Motion Picture       Factor............         0.5         2.8         0.4        27.3        0.604  ..........        11.0         8.0
 Theaters.                           Size Std..........         6.5         7.5         8.5        23.0          6.0
512191 Teleproduction and Other      Factor............         2.2       110.7         1.3        23.8        0.817  ..........        19.5        34.5
 Postproduction Services.            Size Std..........        13.5        11.0        13.5        20.5         32.0
512199 Other Motion Picture and      Factor............         2.8        86.7         1.4        66.6        0.815  ..........        25.0        22.0
 Video Industries.                   Size Std..........        16.0        10.0        14.0        41.5         31.5
512240 Sound Recording Studios.....  Factor............         0.6         7.9         0.4        13.4        0.696  ..........         9.5         8.0
                                     Size Std..........         7.0         7.5         8.0        12.5         10.0
512290 Other Sound Recording         Factor............         1.3        38.4         0.9        42.0        0.777  ..........        20.0        12.0
 Industries.                         Size Std..........        10.0         8.5        11.0        34.5         24.5
515111 Radio Networks..............  Factor............        11.8     2,274.1        16.8        76.5        0.873  ..........        41.5        35.0
                                     Size Std..........        41.5        41.5        41.5        41.5         41.5
515112 Radio Stations..............  Factor............         4.2     1,018.6         5.9        46.2        0.834  ..........        36.0        41.5
                                     Size Std..........        21.5        41.5        39.0        38.0         35.0
515120 Television Broadcasting.....  Factor............        53.4     3,348.2        66.8        52.0        0.879  ..........        41.5        41.5
                                     Size Std..........        41.5        41.5        41.5        41.5         41.5
515210 Cable and Other Subscription  Factor............       154.7     7,147.3       119.0        58.9        0.894  ..........        41.5        41.5
 Programming.                        Size Std..........        41.5        41.5        41.5        41.5         41.5
517410 Satellite Telecommunications  Factor............        15.8       753.3         6.6        48.1        0.865         1.5        38.5        35.0
                                     Size Std..........        41.5        32.5        41.5        39.5         40.5        35.0

[[Page 62380]]

 
517919 All Other Telecommunications  Factor............         6.8       764.1         3.1        39.5        0.869        -3.9        33.0        35.0
                                     Size Std..........        32.0        33.0        23.5        32.5         41.5        35.0
518210 Data Processing, Hosting,     Factor............        10.9     1,122.5         5.5        15.9        0.849         8.2        33.0        35.0
 and Related Services.               Size Std..........        41.5        41.5        36.5        14.0         37.5        35.0
519110 News Syndicates.............  Factor............         7.7       263.9         2.6        59.5        0.859  ..........        32.0        30.0
                                     Size Std..........        35.5        16.0        21.0        41.5         39.5
519120 Libraries and Archives......  Factor............         1.1        88.8         0.4        34.1        0.803         9.3        18.5        16.5
                                     Size Std..........         9.0        10.5         8.0        28.5         29.5        16.5
519190 All Other Information         Factor............         2.9       117.8         1.1        43.0        0.846       -25.8        26.5        30.0
 Services.                           Size Std..........        16.5        11.5        12.5        35.5         37.0        34.5
522220 Sales Financing.............  Factor............        34.7     3,705.1       115.7        33.6        0.885  ..........        38.0        41.5
                                     Size Std..........        41.5        41.5        41.5        28.0         41.5
522291 Consumer Lending............  Factor............         9.7     2,845.5        32.2        52.3        0.873  ..........        41.5        41.5
                                     Size Std..........        41.5        41.5        41.5        41.5         41.5
522292 Real Estate Credit..........  Factor............        28.9     8,476.2        57.7        43.7        0.869  ..........        40.0        41.5
                                     Size Std..........        41.5        41.5        41.5        36.0         41.5
522293 International Trade           Factor............         3.7        44.4         7.3        46.9        0.806  ..........        31.0        41.5
 Financing.                          Size Std..........        19.5         9.0        41.5        38.5         30.0
522294 Secondary Market Financing..  Factor............     2,094.2  ..........     4,188.4  ..........  ...........  ..........        41.5        41.5
                                     Size Std..........        41.5                    41.5
522298 All Other Nondepository       Factor............         6.0  ..........        30.0  ..........  ...........  ..........        35.5        41.5
 Credit Intermediation.              Size Std..........        29.0                    41.5
522310 Mortgage and Nonmortgage      Factor............         1.1        44.5         1.9        11.0        0.742       -10.5        13.0         8.0
 Loan Brokers.                       Size Std..........         9.0         9.0        16.5        10.5         18.0        10.5
522320 Financial Transactions        Factor............        21.3     2,801.2        14.2        37.0        0.886         0.8        39.5        41.5
 Processing, Reserve, and            Size Std..........        41.5        41.5        41.5        31.0         41.5        41.5
 Clearinghouse Activities.
522390 Other Activities Related to   Factor............         3.1       239.2         3.8        18.1        0.854       -16.0        25.0        22.0
 Credit Intermediation.              Size Std..........        17.0        15.5        27.5        16.0         38.5        26.5
523110 Investment Banking and        Factor............        41.2     7,592.5        29.4        46.7        0.891         1.1        41.0        41.5
 Securities Dealing.                 Size Std..........        41.5        41.5        41.5        38.5         41.5        41.5
523120 Securities Brokerage........  Factor............        13.3     5,432.2         5.5        33.9        0.886  ..........        37.0        41.5
                                     Size Std..........        41.5        41.5        37.0        28.5         41.5
523130 Commodity Contracts Dealing.  Factor............        11.5       314.6         4.1        35.9        0.872  ..........        32.5        41.5
                                     Size Std..........        41.5        18.0        29.0        30.0         41.5
523140 Commodity Contracts           Factor............         4.7       366.7         1.2        40.1        0.851  ..........        26.5        41.5
 Brokerage.                          Size Std..........        23.5        19.5        13.0        33.0         38.0
523210 Securities and Commodity      Factor............       692.4     2,097.6       314.7        84.8        0.683  ..........        33.0        41.5
 Exchanges.                          Size Std..........        41.5        41.5        41.5        41.5          7.5
523910 Miscellaneous Intermediation  Factor............         2.4       332.7        12.1        19.4        0.827  ..........        27.0        41.5
                                     Size Std..........        14.5        18.5        41.5        17.0         33.5
523920 Portfolio Management........  Factor............         9.2     1,893.2         7.6        13.0        0.868        12.9        35.5        41.5
                                     Size Std..........        41.5        41.5        41.5        12.0         41.0        41.5
523930 Investment Advice...........  Factor............         2.3       847.8         0.9        29.2        0.842       -20.8        27.5        41.5
                                     Size Std..........        14.0        35.5        11.0        24.5         36.5        41.5
523991 Trust, Fiduciary, and         Factor............         8.7     2,183.6         9.6        58.7        0.873         1.4        41.5        41.5
 Custody Activities.                 Size Std..........        39.5        41.5        41.5        41.5         41.5        41.5
523999 Miscellaneous Financial       Factor............        12.1     1,063.7        20.2        63.5        0.884        23.7        41.5        41.5
 Investment Activities.              Size Std..........        41.5        41.5        41.5        41.5         41.5        41.5
524113 Direct Life Insurance         Factor............       813.7    19,613.2     1,162.4        29.1        0.887  ..........        37.5        41.5
 Carriers.                           Size Std..........        41.5        41.5        41.5        24.5         41.5
524114 Direct Health and Medical     Factor............       866.5    28,836.1       393.9        34.4        0.866         3.1        38.5        41.5
 Insurance Carriers.                 Size Std..........        41.5        41.5        41.5        28.5         40.5        41.5
524127 Direct Title Insurance        Factor............        16.3     3,552.3         8.6        89.4        0.888  ..........        41.5        41.5
 Carriers.                           Size Std..........        41.5        41.5        41.5        41.5         41.5
524128 Other Direct Insurance        Factor............        26.0       813.3        52.1        43.1        0.877  ..........        39.0        41.5
 (except Life, Health, and Medical)  Size Std..........        41.5        34.5        41.5        35.5         41.5
 Carriers.
524130 Reinsurance Carriers........  Factor............       363.4     3,744.8       403.7        49.4        0.831  ..........        39.5        41.5
                                     Size Std..........        41.5        41.5        41.5        40.5         34.5
524210 Insurance Agencies and        Factor............         0.9       488.3         0.5        11.2        0.735       -45.1        13.0         8.0
 Brokerages.                         Size Std..........         8.0        23.5         9.0        10.5         17.0        13.0
524291 Claims Adjusting............  Factor............         1.7       119.8         0.6        21.8        0.812  ..........        18.0        22.0
                                     Size Std..........        11.5        11.5         9.5        19.0         31.0
524292 Third Party Administration    Factor............        48.1    34,890.1        28.3        76.3        0.886        58.1        40.0        35.0
 of Insurance and Pension Funds.     Size Std..........        41.5        41.5        41.5        41.5         41.5        35.0
524298 All Other Insurance Related   Factor............         3.2       411.0         2.1        49.2        0.848       -14.7        27.0        16.5
 Activities.                         Size Std..........        17.5        21.0        18.0        40.5         37.5        20.0
525110, Pension Funds, 525120,       Factor............         2.7       216.2        13.8  ..........       0.8612  ..........        32.5        35.0
 Health and Welfare Funds, and       Size Std..........        16.0        14.5        41.5                     40.0
 525190, Other Insurance Funds, and
 525920, Trusts, Estates, and
 Agency Accounts.
525910 Open-End Investment Funds...  Factor............         2.6        24.5        13.2        58.2        0.807  ..........        31.5        35.0
                                     Size Std..........        15.5         8.0        41.5        41.5         30.0
525990 Other Financial Vehicles....  Factor............         2.8       244.0        13.9  ..........        0.865  ..........        32.5        35.0
                                     Size Std..........        16.0        15.5        41.5                     40.5

[[Page 62381]]

 
531110 Lessors of Residential        Factor............         1.7       333.6         8.5         9.3        0.765        -3.8        23.5        30.0
 Buildings and Dwellings.            Size Std..........        11.5        18.5        41.5         9.0         22.5        30.0
531120 Lessors of Nonresidential     Factor............         3.1       691.1        31.1        11.5        0.825        -6.2        28.0        30.0
 Buildings (except Miniwarehouses).  Size Std..........        17.0        30.5        41.5        11.0         33.5        30.0
531130 Lessors of Miniwarehouses     Factor............         0.8       413.7         4.2        33.7        0.698  ..........        20.5        30.0
 and Self-Storage Units.             Size Std..........         8.0        21.0        29.0        28.0         10.5
531190 Lessors of Other Real Estate  Factor............         0.9        84.1         4.4        18.0        0.689  ..........        16.0        30.0
 Property.                           Size Std..........         8.0        10.0        30.5        16.0          8.5
Exception to 531110,531120,531130,   Factor............        45.1     1,172.4       297.9        47.5        0.862        60.3        40.5        41.5
 and 531190--Review footnote #9.     Size Std..........        41.5        41.5        41.5        39.0         40.0        41.5
531210 Offices of Real Estate        Factor............         0.9       398.6         0.4        13.3        0.758       -11.1        13.0         8.0
 Agents and Brokers.                 Size Std..........         8.0        20.5         8.0        12.0         21.0        10.5
531311 Residential Property          Factor............         1.0        44.2         1.1         4.7        0.756        28.3        11.0         8.0
 Managers.                           Size Std..........         9.0         9.0        12.5         6.0         20.5         8.0
531312 Nonresidential Property       Factor............         1.0        28.0         5.2         5.9        0.732  ..........        17.0         8.0
 Managers.                           Size Std..........         9.0         8.5        35.0         6.5         16.5
531320 Offices of Real Estate        Factor............         0.4        33.1         0.1        12.4        0.695        26.4         8.5         8.0
 Appraisers.                         Size Std..........         6.5         8.5         6.5        11.5          9.5         8.0
531390 Other Activities Related to   Factor............         0.8        95.8         4.1        15.6        0.764       -12.5        17.0         8.0
 Real Estate.                        Size Std..........         8.0        10.5        29.0        14.0         22.5        10.5
532111 Passenger Car Rental........  Factor............        13.3     7,875.5        19.0        90.1        0.889        -0.9        41.5        41.5
                                     Size Std..........        41.5        41.5        41.5        41.5         41.5        41.5
532112 Passenger Car Leasing.......  Factor............        16.8       830.6        56.0        62.4        0.873         0.2        41.0        41.5
                                     Size Std..........        41.5        35.0        41.5        41.5         41.5        41.5
532120 Truck, Utility Trailer, and   Factor............         9.2     1,781.6        15.3        62.6        0.869        58.8        41.5        41.5
 RV (Recreational Vehicle) Rental    Size Std..........        41.5        41.5        41.5        41.5         41.0        41.5
 and Leasing.
532210 Consumer Electronics and      Factor............        10.7     2,040.5         5.9        80.1        0.866  ..........        40.5        41.5
 Appliances Rental.                  Size Std..........        41.5        41.5        39.0        41.5         40.5
532281 Formal Wear and Costume       Factor............         0.6        12.0         0.3        24.9        0.714  ..........        12.5        22.0
 Rental.                             Size Std..........         7.0         8.0         8.0        21.5         13.0
532282 Video Tape and Disc Rental..  Factor............         2.3     1,168.7         1.2        86.1        0.865  ..........        31.0        30.0
                                     Size Std..........        14.0        41.5        13.0        41.5         40.5
532283 Home Health Equipment Rental  Factor............         7.6       851.4         4.7        65.5        0.830        15.5        36.0        35.0
                                     Size Std..........        35.0        35.5        32.5        41.5         34.5        35.0
532284 Recreational Goods Rental...  Factor............         0.5         4.7         0.2        10.0        0.632  ..........         7.5         8.0
                                     Size Std..........         6.5         7.5         7.5         9.5          6.0
532289 All Other Consumer Goods      Factor............         1.1        34.1         0.6        15.1        0.708  ..........        11.0         8.0
 Rental.                             Size Std..........         9.0         8.5         9.5        13.5         12.0
532310 General Rental Centers......  Factor............         0.9         6.3         0.7         6.9        0.610  ..........         7.5         8.0
                                     Size Std..........         8.5         7.5         9.5         7.0          6.0
532411 Commercial Air, Rail, and     Factor............        18.8     2,011.1        46.9        61.4        0.882        33.4        40.0        35.0
 Water Transportation Equipment      Size Std..........        41.5        41.5        41.5        41.5         41.5        35.0
 Rental and Leasing.
532412 Construction, Mining, and     Factor............         7.8       655.5         9.8        32.8        0.824         3.3        34.0        35.0
 Forestry Machinery and Equipment    Size Std..........        36.5        29.0        41.5        27.5         33.0        35.0
 Rental and Leasing.
532420 Office Machinery and          Factor............         4.7       109.7         6.7        40.0        0.832        28.6        32.5        35.0
 Equipment Rental and Leasing.       Size Std..........        23.5        11.0        41.5        33.0         34.5        35.0
532490 Other Commercial and          Factor............         5.3       372.8         6.6        21.0        0.822        18.2        30.0        35.0
 Industrial Machinery and Equipment  Size Std..........        26.0        20.0        41.5        18.0         33.0        35.0
 Rental and Leasing.
533110 Lessors of Nonfinancial       Factor............        14.0       795.5        28.0        23.0        0.867  ..........        35.0        41.5
 Intangible Assets (except           Size Std..........        41.5        34.0        41.5        20.0         41.0
 Copyrighted Works).
--------------------------------------------------------------------------------------------------------------------------------------------------------

Evaluation of Size Standards for Subindustry Categories or 
``Exceptions''

    In accordance with SBA's approach to evaluating size standards for 
subindustry categories (or ``exceptions''), SBA has evaluated the two 
(2) exceptions covered by this rule using the procedures described in 
the revised SBA's Methodology. The results of that analysis are 
discussed in the following two subsections.

Non-Vessel Owning Common Carriers and Household Goods Forwarders

    Non-Vessel Owning Common Carriers and Household Good Forwarders is 
an ``exception'' or subindustry under NAICS 488510 (Freight 
Transportation Arrangement), with the size standard of $30.0 million in 
average annual receipts. The data that SBA receives from the Census 
Bureau's tabulation are limited to the 6-digit NAICS industry level and 
therefore do not provide information on economic characteristics of 
firms at the sub-industry level. Thus, for reviewing or modifying size 
standards at the subindustry levels (``exceptions''), SBA normally 
evaluates data from FPDS-NG and SAM using a two-step procedure.

[[Page 62382]]

First, using FPDS-NG, SBA identifies Product Service Codes (PSCs) that 
correspond to specific exceptions. SBA then identifies firms that have 
received federal contracts under those PSCs and evaluates their 
receipts and employee data from SAM and FPDS-NG to derive the values 
for industry and federal contracting factors.
    Contracting activity for NAICS 488510 including the exception is 
distributed over roughly 70 different PSCs. Using FPDS-NG data for 
fiscal years 2016-2018, SBA identified 5 primary PSCs that correspond 
to the overall industry including the exception, that amount to 95.6 
percent of total dollars obligated on NAICS 488510. These PSCs are V119 
(Transportation/Travel/Relocation-Transportation: Other), W023 (Lease-
Rent of Vehicles-Trailers-CYC), M1GZ (Operation of Other Warehouse 
Buildings), V112 (Transportation/Travel/Relocation-Transportation: 
Motor Freight) and R706 (Support-Management: Logistics Support). The 
top PSC alone, V119, accounts for 70 percent of total dollars 
obligated. Table 5, Primary PSCs of NAICS 488510 and Average Dollars 
Obligated--Fiscal Years 2016-2018, below identifies these five (5) PSCs 
and their average total dollars obligated for the fiscal years 2016-
2018.
    SBA analyzed the contracting activity under these PSCs, but the 
Agency was unable to reliably differentiate the level of activity 
corresponding to the exception versus the overall industry, and to 
identify any PSCs that would correspond uniquely to the exception.

        Table 5--Primary PSCs of NAICS 488510 and Average Total Dollars Obligated Fiscal Years 2016-2018
----------------------------------------------------------------------------------------------------------------
                                                                                  Percentage  of    Cumulative
                                                                      Dollars         dollars     percentage  of
               PSC                        PSC description          obligated  ($   obligated to     total NAICS
                                                                     million)      primary PSCs       488510
----------------------------------------------------------------------------------------------------------------
V119.............................  Transportation/Travel/                $126.76            70.2            70.2
                                    Relocation-Transportation:
                                    Other.
W023.............................  Lease-Rent of Vehicles                  32.17            17.8            88.0
                                    Trailers-CYC.
M1GZ.............................  Operation of Other Warehouse             7.96             4.4            92.4
                                    Buildings.
V112.............................  Transportation/Travel/                   3.14             1.7            94.1
                                    Relocation-Transportation:
                                    Motor Freight.
R706.............................  Support Management: Logistics            2.62             1.5            95.6
                                    Support.
                                                                 -----------------------------------------------
    Total........................  .............................          180.64           100.0  ..............
----------------------------------------------------------------------------------------------------------------
Source: FPDS-NG.

    SBA also reviewed the distribution of contracts awarded to small 
and other than small businesses in the overall industry. SBA found that 
only about $2 million or 1.1% of the $189.9 Million obligated to the 
overall industry went to small businesses. Thus, while the total 
contracting dollars obligated to all firms in the industry is 
significant, the total dollars obligated to small firms is not. 
Additionally, the top agencies using the NAICS code 488510, USTRANSCOM 
and Federal Emergency Management Agency, which account for 91.3 percent 
of total dollars obligated during the period evaluated, have no small 
business dollars.
    In an effort to differentiate the exception from the overall 
industry and determine its economic characteristics, SBA evaluated 2012 
Economic Census sub-industry data found in the US Census American 
FactFinder. The data divide NAICS 488510 in two components identified 
with an additional digit. First, the 7-digit level NAICS 4885101 
(Freight Forwarders), and second the 7-digit level NAICS 4885102 
(Arrangement of transportation of freight and cargo). The NAICS 4885101 
includes Non-vessel operating common carrier service as one of the 
principal activities. SBA understands that NAICS 4885101 corresponds to 
the activity classified as an exception to the General NAICS 6 digit 
488510. The NAICS 4885101 includes multimodal activities supporting 
transportation, and the firms assume responsibility for delivery of the 
goods.\1\
---------------------------------------------------------------------------

    \1\ The Census definition is: ``This U.S. Census Bureau NAICS-
based industry comprises establishments primarily engaged in 
undertaking the transportation of goods from shippers to receivers 
for a charge covering the entire transportation, and in turn making 
use of the services of various freight carriers in affecting 
delivery, paying transportation charges, and assuming responsibility 
for delivery of the goods. There is no relationship between shippers 
and the various freight carriers delivering the goods.''
---------------------------------------------------------------------------

    SBA evaluated the economic characteristics of NAICS 4885101 to the 
overall industry and found them to be similar. Table 6, Industry 
Comparison NAICS 488510 and NAICS 4885101, displays a comparison of 
several economic factors between NAICS 488510 (overall industry) and 
NAICS 4885101 (industry exception).

       Table 6--Industry Comparison NAICS 488510 and NAICS 4885101
------------------------------------------------------------------------
                                       NAICS 488510
 Economic characteristic  (factor)       (overall        NAICS 4885101
                                        industry)         (exception)
------------------------------------------------------------------------
Average Firm Size by Total                       $3.4               $4.0
 Receipts ($ millions)............
Average Firm Size by Number of                     16                 17
 Employees........................
Weighted Average Firm Size by                  $121.9             $100.6
 Total Receipts ($ millions)......
Concentration Ratio of Top 4                    11.0%              14.5%
 Largest Firms by Total Receipts
 (CR4) %..........................
Percentage of Small Firms (based                88.1%              85.6%
 on current size standards) (%)...
------------------------------------------------------------------------
Source: U.S. Census Bureau, AmericanFactFinder and SBA calculations.

    Despite the similarities between the overall industry and the 
exception, SBA recognizes that there are important distinctions between 
freight forwarders and NVOCCs. For example, the Federal Maritime 
Commission defines a freight forwarder as a company that arranges cargo 
movement to an international destination, dispatches shipments from

[[Page 62383]]

the United States via common carriers and books or otherwise arranges 
space for those shipments on behalf of shippers and prepares and 
processes the documentation and performs related activities pertaining 
to those shipments.'' \2\ Conversely, the Federal Maritime Commission 
defines an NVOCC as ``a common carrier that holds itself out to the 
public to provide ocean transportation, issues its own house bill of 
lading or equivalent document, and does not operate the vessels by 
which ocean transportation is provided; a shipper in its relationship 
with the vessel-operating common carrier involved in the movement of 
cargo.'' Thus, the distinction between freight forwarders and NVOCCs 
will be not on the activity or service provided, but in the level of 
responsibility and the type of revenue that counts for the firm. 
Product Service Codes within NAICS 488510 do not distinguish between 
agents or NVOCCs, so it is a challenge to choose a PSC code to evaluate 
the exception.
---------------------------------------------------------------------------

    \2\ See Federal Maritime Commission web page for definitions of 
Freight Forwarder and Non-Vessel Owning Common Carriers at: https://www.fmc.gov/resources-services/ocean-transportation-intermediaries/.
---------------------------------------------------------------------------

    Prior to 2000, the exception under NAICS 488510 did not exist. SBA 
did not recognize the differences between freight forwarders acting as 
agents (or brokers) and freight forwarders that are Non-Vessel 
Operating Common Carriers (NVOCCs) and Household Goods Forwarders, and 
applied a similar size to both ($18.5 million).
    On August 9, 2000, SBA adopted the differentiation between agents 
and NVOCCs (65 FR 48601). SBA assigned a smaller size standard of $5 
million to the overall industry which included the activity of agents 
and a higher size standard of $18.5 million to the exception which 
included the activities of NVOCCs and Household Goods Forwarders. SBA's 
justification for a lower size for the overall industry was that the 
revenues of freight forwarders, which typically act as agents or 
brokers, do not correspond to their intermediation activity whereas the 
revenues of NVOCCs, which typically act as wholesalers of cargo space, 
may have substantial expenses not usually incurred by agent or broker 
firms.
    Despite these distinctions, SBA's preliminary analysis of industry 
structure suggests that firms in the exception and overall industry may 
be performing similar functions or that there may be significant 
overlap in the services offered by freight forwarders and NVOCCs. The 
absence of an easily identifiable PSC that is unique to the business 
activities of NVOCCs also supports this finding. Moreover, SBA's 
analysis of contracting data found that contracting officers prefer to 
use the lower size standard of $16.5 million rather than the higher 
size standard of $30 million available for the exception. This suggests 
that agencies are able to obtain the services needed provided by the 
overall NAICS using the lower size standard applicable to NAICS 488510.
    For these reasons, SBA proposes to retain the sub-industry category 
(``exception'') under NAICS 488510 and its $30.0 Million size standard. 
SBA invites comments, along with supporting information, on this 
proposal as well as suggestions on whether the proposed size standard 
of $17.5 million for the overall industry is more appropriate for this 
exception. SBA also welcomes comments on the percent of Federal 
contracting dollars that correspond to NVOCCs versus the overall 
industry. Finally, SBA requests comments on available data sources that 
clearly define the economic characteristics of NVOCCs, and Household 
Goods Forwarders as well.

Exception to NAICS Industry Group 5311: Leasing of Building Space to 
the Federal Government by Owners

    The current size standard for Federal contracts for Leasing of 
Building Space to Federal Government by Owners (``exception'' to NAICS 
industry group 5311 (531110, 531120, 531130, and 531190) is $41.5 
million. This size standard applies only to certain Federal contracting 
opportunities that meet specific criteria. Footnote 9 of SBA's table of 
size standards (13 CFR 121.201) reads: ``For Government procurement, a 
size standard of $41.5 million in gross receipts applies to the owners 
of building space leased to the Federal Government. This size standard 
does not apply to an agent.''
    To determine if the current $41.5 million size standard is 
appropriate, SBA evaluated average firm size, market concentration, and 
size distribution of firms involved in Leasing of Building Space to 
Federal Government by Owners. SBA used data from FPDS-NG and SAM.gov 
and followed the procedure described under the section ``Sources of 
Industry and Program Data'' (above). Based on the data for fiscal years 
2016-2018, Federal contracts awarded to NAICS 6 digit industries 
531110, 531120, 531130 and 531190 averaged about $221.0 million 
annually, with the largest percentage going to NAICS 531120 (75.5 
percent). SBA chose to analyze dollars awarded to product service codes 
(PSC) X111/X1AA (Lease/Rental of Office Building), X1FZ (Lease or 
rental of other residential buildings), and X179 (Lease or rent of 
other warehouse buildings) across the four NAICS industries within 
5311. Dollars obligated to these three PSCs add to $130.1 million in 
average in fiscal years 2016-2018, which represents 58.9 percent of 
total dollars obligated to these NAICS 6-digit industries. The results, 
as shown in Table 4, support retaining the current size standard of 
$41.5 million.

Evaluation of the Assets-Based Size Standard

    In 1984, SBA published a notice of policy allowing financial 
services that prime contractors procure from small minority owned and 
controlled financial institutions to qualify as subcontracts for 
purposes of meeting subcontracting goals and credits (see 49 FR 13091-
01 (April 2, 1984)). Concurrently, SBA also published a proposed rule 
that a financial institution with total assets of not more than $100 
million would be considered small (see 49 FR 13052-01 (April 2, 1984)). 
SBA adopted the $100 million in total assets as the size standard for 
financial institutions (see 49 FR 49398-01 (October 16, 1984)). Over 
time, the definition of small depository institution was extended to 
all financial institutions within NAICS 5221, Depository Credit 
Intermediation. Since then, along with other monetary-based size 
standards, SBA has periodically adjusted the assets-based size standard 
for inflation, with the latest adjustment increasing it to $600 million 
(see 84 FR 34261 (July 18, 2019)).
    Currently, the $600 million assets-based size standard applies to 
four industries within NAICS Industry Group 5221, and one industry 
within NAICS Industry Group 5222, Non-depository Credit Intermediation. 
These include NAICS 522110 (Commercial Banking), NAICS 522120 (Savings 
Institutions), NAICS 522130 (Credit Unions), NAICS 522190 (Other 
Depository Credit Intermediation), and NAICS 522210 (Credit Card 
Issuing).
    Because only a small number of industries have assets-based size 
standards, no comparison groups could be developed to assess differing 
characteristics of individual industries based on total assets. Thus, 
most of the SBA's size standards methodology is not applicable to 
analyzing the assets-based size standards for financial institutions. 
Consequently, in this proposed rule, SBA has examined the changes since 
2011 (the year that the assets-based size standard was last reviewed) 
in other financial industry factors to assess whether the current $600 
million assets-

[[Page 62384]]

based size standard should be modified to reflect today's financial 
industry structure. Specifically, SBA evaluated changes from 2011 to 
2018 (the latest year for which the financial institution data are 
available) in average firm size, industry concentration, and 
distribution of firms by size (i.e., Gini coefficient) for financial 
institutions. As it did in the Sector 52 proposed and final rules (see 
77 FR 55737 (September 11, 2012) and 78 FR 37409 (June 20, 2013)) in 
the prior review, in this proposed rule, SBA both evaluated depository 
institutions as a whole and the minority owned and controlled 
depository institutions separately.
    SBA evaluated all depository institutions using SDI data. SDI does 
not provide the NAICS definition for every firm included in the 
database. However, it has a field called Asset Concentration Hierarchy, 
which can be used to identify each institution's primary specialization 
in terms of asset concentration, such as credit card services. Another 
field, Bank Charter Class, identifies the institutions as banks or 
thrifts. SDI does not include data on Credit Unions (NAICS 522130). 
Because the data are not separated by NAICS code, and also the 
differences among services offered by different financial institutions 
(such as commercial banks, saving institutions, and credit card issuing 
companies) have greatly diminished over the recent decades, SBA has 
analyzed all financial institutions as one industry group.
    SBA identified Minority Depository Institutions using the list of 
minority depository institutions compiled by the Federal Depository 
Institutions (FDIC) (https://www.fdic.gov/regulations/resources/minority/mdi.html). SBA examined their characteristics using the assets 
data from SDI database too fully capture the changes in industry 
structure of minority-owned financial institutions since 2011.
    The number of all depository institutions, total assets and 
calculated industry factors for 2011 and 2018 are shown on Table 7, 
Calculated Industry Factors for All Depository Institutions. All data 
were collected at the end of the corresponding calendar year. Similar 
calculations for the minority-owned depository institutions are shown 
on Table 8, Calculated Industry Factors for Minority Owned Depository 
Institutions. For comparability, all monetary values are expressed in 
2018 dollars, using the Bureau of Economic Analysis (BEA) GDP deflator 
for 2018 (Source: BEA's Table 1.1.4. Price Indexes for Gross Domestic 
Product, https://apps.bea.gov/iTable/iTable.cfm?reqid=19&step=2#reqid=19&step=2&isuri=1&1921=survey).

                                          Table 7--Calculated Industry Factors for All Depository Institutions
                                                  [All monetary values are in millions of 2018 dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                              Simple         Weighted
                          Year                               Number of     Total assets    average  firm   average  firm     Four-firm         Gini
                                                           institutions                        size            size         ratio  (%)      coefficient
--------------------------------------------------------------------------------------------------------------------------------------------------------
2011....................................................           7,366   $15,682,868.5        $2,129.1       $84,083.9            41.0           0.907
2018....................................................           5,415    18,034,370.5         3,330.4        91,644.4            39.4           0.911
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: SDI/FDIC (https://www7.fdic.gov/sdi/download_large_list_outside.asp). Data correspond to Fourth quarter of calendar year 2018 and deflated using
  GDP deflator).


                                        Table 8--Calculated Industry Factors for Minority Depository Institutions
                                                  [All monetary values are in millions of 2018 dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                              Simple         Weighted
                          Year                               Number of     Total assets    average  firm   average  firm     Four-firm         Gini
                                                           institutions                        size            size         ratio  (%)      coefficient
--------------------------------------------------------------------------------------------------------------------------------------------------------
2011....................................................             187      $204,192.6        $1,091.9        $9,923.4            40.6           0.782
2018....................................................             149       233,929.0         1,570.0        14,024.3            47.5           0.776
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: FRB and FDIC (table https://www.fdic.gov/regulations/resources/minority/mdi-history.xlsx).

    During the 2011 to 2018 span, as shown on Table 7, above, the 
financial industry continued to show a decrease in the total number of 
depository institutions in 2018 as compared to 2011. The total number 
of all financial depository institutions decreased by 26.5 percent from 
7,366 in 2011 to 5,415 in 2018, while their total assets (measured in 
2018 dollars) increased by 15.0 percent during the same period. The 
average firm size (measured in total assets) also increased from 2011 
to 2018, with their simple average firm size increasing by a factor of 
1.56 and the weighted average firm size increasing by a factor of 1.09. 
The four largest institutions' share of total assets (also referred to 
as four-firm concentration ratio or CR4) slightly decreased (from 41.0% 
to 39.4%), but the Gini coefficient value slightly increased from 0.907 
in 2011 to 0.911 in 2018. Overall, the values of these factors confirm 
an increase over time in average size of the depository institutions, 
and an increase in concentration. The average firm size and Gini 
coefficient value for the minority owned banks on Table 8 also 
confirmed the continuation of the trend of increased concentration in 
the financial industry, even more than for the total industry as 
reflected on Table 7. For example, the four firm concentration ratio 
for minority depository institutions increased from 40.6 in 2011 to 
47.5 in 2018. This is an increase by a factor of 1.17, although the 
Gini coefficient decreased slightly.
    For the five assets-based industries listed above, Federal 
contracting dollars averaged about $130 million per year during fiscal 
years 2016-2018. This reflects a large increase in dollars awarded to 
those industries when compared to fiscal years 2008-2010, when the 
average total dollars obligated to them was about $22 million. Of those 
five industries, NAICS 522110, Commercial Banking, accounts for 99.6 
percent of the average total dollars obligated. Thus, under SBA's 
methodology, different than the first comprehensive review, Federal 
contracting is a significant factor for reviewing the assets-based size 
standard for the industries.
    The current structure of the financial industry relative to that 
for 2011, as

[[Page 62385]]

discussed above, strongly supports increasing the current $600 million 
assets-based size standard. The changes in industry factors for all 
financial institutions on Table 7 as well as the results for the 
minority-owned institutions in Table 8 support a size standard in the 
range of $700 million to $1 billion in total assets. SBA is proposing 
$750 million as it would include about 81 percent of the financial 
institutions and 5.3 percent of total assets of all financial 
institutions as compared to 77.3 percent of institutions and about 4.6 
percent of total assets under the current $600 million. Similarly, it 
would include about 75.2 percent of institutions and 12.08 percent of 
the total assets of all minority owned institutions, as compared to 
71.4 percent of institutions and 10.4 percent of total assets under the 
current $600 million.
    The proposed $750 million assets-based size standard would apply to 
the following four industries within NAICS Subsector 522, Credit 
Intermediation and Related Activities: NAICS 522110 (Commercial 
Banking), NAICS 522120 (Savings Institutions), NAICS 522190 (Other 
depository Credit Intermediation), and NAICS 522210 (Credit Card 
Issuing).

NAICS 522130, Credit Unions

    A credit union is a cooperative, not-for-profit financial 
institution owned and controlled by its members. Credit unions are 
established and operated for the purpose of promoting thrift and 
providing credit at competitive rates and other financial services to 
their membership. Generally, they could be corporate credit unions, 
Federal, or State credit unions. Because this industry includes only 
not-for-profit institutions, SBA does not consider them small business 
concerns for Federal government assistance. The small business 
regulations state that a business concern eligible for assistance from 
SBA as a small business is a business entity organized for profit, with 
a place of business located in the United States (see 13 CFR 
121.05(a)(1)). However, SBA determines size standard for this industry 
because it is useful for other purposes, such as rulemaking. Table 9, 
Calculated Industry Factors for Credit Unions, provides the calculated 
factors for Credit Unions. Between 2011 and 2018, the total number of 
concerns diminished by 24 percent, but at the same time the total 
assets increased by a factor of 1.34. The simple average almost doubled 
(1.77) between 2011 and 2018 in real terms, and the weighted average 
grew by a factor of more than 1.5. The four firm concentration ratio 
increased by a factor of 1.24. Gini coefficient did not change 
significantly during the period. All these factors support an increase 
of size standard for Credit Unions and SBA proposes $750 million as 
well. With this size standard, the percentage of small firms will 
increase to 92.8 percent compared to 91.2 percent with the current $600 
million size standard. Similarly, the share of small business assets 
will increase to about 30 percent from 25.7 percent.

                                                 Table 9--Calculated Industry Factors for Credit Unions
                                                  [All monetary values are in millions of 2018 dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                              Simple         Weighted
                          Year                               Number of     Total assets    average  firm   average  firm     Four-firm         Gini
                                                           institutions                        size            size         ratio  (%)      coefficient
--------------------------------------------------------------------------------------------------------------------------------------------------------
2011....................................................           7,240    $1,096,069.7          $151.4        $3,720.2             9.8           0.828
2018....................................................           5,492     1,470,839.4           267.8         5,687.5            12.2           0.833
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: NCUA,https://www.ncua.gov/analysis/credit-union-corporate-call-report-data/quarterly-dat.

Special Considerations

NAICS Subsector 525, Funds, Trusts and Other Financial Vehicles

    As noted earlier, the 2012 Economic Census special tabulation 
includes data only for two NAICS codes within NAICS Subsector 525: 
NAICS 525910, Open-End Investment Funds, and NAICS 525990, Other 
Financial Vehicles. Because all industries in that Subsector currently 
share the same $35.0 million receipts-based size standard, SBA applies 
the results based on data for NAICS 525910 and 525990, as shown in 
Table 4 (above), to all remaining industries within this Subsector and 
initially proposes the same common size standard of $32.5 million in 
average annual receipts for all six industries in Subsector 525. While 
that represents a slight decrease from the current $35.0 million level, 
this would have virtually no impacts on the number of small firms nor 
on the amount of Federal contract dollars awarded to small firms under 
the current size standards. However, while lowering size standards 
would cause no or very little impact on small businesses in those 
industries, in response to the COVID-19 emergency and its impacts on 
small businesses and the overall economy, SBA is proposing to maintain 
the size standards for those industries at their current levels. SBA 
seeks comments on this proposal as well as suggestion on alternative 
data sources, if any, to evaluate those industries.

NAICS 524126, Direct Property and Causality Insurance Carriers

    The current size standard for NAICS 524126, Direct Property and 
Causality Insurance, is 1,500 employees, which SBA has not reviewed in 
this proposed rule. SBA will review this size standard together with 
other employee-based size standards at a later date. Until then, SBA 
proposes to retain the current 1,500-employee size standard for NAICS 
524126.

Summary of Calculated Size Standards

    Of the one hundred-twenty four (124) industries and two (2) 
subindustries (exceptions) reviewed in this proposed rule, the results 
from analyses of the latest available data on the five primary factors 
from Table 4, Size Standards Supported by Each Factor for Each Industry 
(millions of dollars), above, would support increasing size standards 
for forty five (45) industries, decreasing size standards for sixty-
nine (69) industries, and retaining size standards for 9 industries and 
2 subindustries. Additionally, SBA retained the size standard for one 
industry that the Economic Census does not cover. Table 10, Summary of 
Calculated Size Standards, summarizes these results by NAICS sector.

[[Page 62386]]



                                 Table 10--Summary of Calculated Size Standards
----------------------------------------------------------------------------------------------------------------
                                           Number of size    Number of size    Number of size    Number of size
     NAICS sector         Sector name         standards         standards         standards         standards
                                              reviewed          increased         decreased         unchanged
----------------------------------------------------------------------------------------------------------------
48-49................  Transportation                   43                18                23                 2
                        and Warehousing.
51...................  Information......                19                 8                 9                 2
52...................  Finance and                      39              * 10                24                 5
                        Insurance.
53...................  Real Estate and                  25                 9                13                 3
                        Rental and
                        Leasing *.
                                         -----------------------------------------------------------------------
    All Sectors......  .................               126                45                69                12
----------------------------------------------------------------------------------------------------------------
* Includes five assets-based size industries.

Evaluation of SBA Loan Data

    Before proposing or deciding on an industry's size standard 
revision, SBA also considers the impact of size standards revisions on 
SBA's loan programs. Accordingly, SBA examined its internal 7(a) and 
504 loan data for fiscal years 2016-2018 to assess whether the 
calculated size standards in Table 4 above need further adjustments to 
ensure credit opportunities for small businesses through those 
programs. For the industries reviewed in this rule, the data shows that 
it is mostly businesses much smaller than the current or proposed size 
standards that receive SBA's 7(a) and 504 loans. For example, for 
industries covered by this rule, more than 99.0 percent of 7(a) and 504 
loans in fiscal years 2016-2018 went to businesses below the current or 
proposed size standards.

Proposed Changes to Size Standards

    Based on the analytical results in Table 4 and considerations of 
impacts of calculated size standards in terms of access by currently 
small businesses to SBA's loans, as discussed above, of a total of one 
hundred twenty six (126) industries or subindustries (exceptions) with 
monetary-based size standards in Sectors 48-49, 51, 52 and 53 that are 
covered by this rule, and considering the current emergency situation 
due to the COVID-19 pandemic and its impacts on small businesses and 
the overall economy, SBA proposes to increase size standards for 45 
industries, and retain the current size standards for the remaining 81 
industries.

Special Considerations

    On March 13, 2020, the ongoing Coronavirus Disease 2019 (COVID-19) 
was declared a pandemic of enough severity and magnitude to warrant an 
emergency declaration for all states, territories, and the District of 
Columbia. With the COVID-19 emergency, many small businesses nationwide 
are experiencing economic hardship as a direct result of the Federal, 
State, and local public health measures that are being taken to 
minimize the public's exposure to the virus. These measures, some of 
which are government-mandated, are being implemented nationwide and 
include the closures of restaurants, bars, and gyms. In addition, based 
on the advice of public health officials, other measures, such as 
keeping a safe distance from others or even stay-at-home orders, are 
being implemented, resulting in a dramatic decrease in economic 
activity as the public avoids malls, retail stores, and other 
businesses.
    The Coronavirus Aid, Relief, and Economic Security Act (the CARES 
Act or the Act) (Pub. L. 116-136) was enacted on March 27, 2020, to 
provide emergency assistance and health care response for individuals, 
families, and businesses affected by the coronavirus pandemic. Section 
1102 of the Act temporarily permits SBA to guarantee 100 percent of 
7(a) loans under a new program titled the Paycheck Protection Program 
(PPP). Section 1106 of the Act provides for forgiveness of up to the 
full principal amount of qualifying loans guaranteed under the PPP. The 
PPP and loan forgiveness are intended to provide economic relief to 
small businesses nationwide adversely impacted under the COVID-19. On 
April 24, 2020, additional funding for the CARES Act, including for the 
PPP, was provided.
    The Agency is following closely the development of the pandemic and 
the economic situation and recovery. The consequence of the initial 
response of the public to the COVID-19 pandemic as well as the 
different measures taken by the Government to contain it (e.g. stay at 
home orders, social distancing, etc.) have resulted in the present 
economic decline. A variety of economic indicators such as the Gross 
Domestic Product (GDP) and the unemployment rate shows that this 
recession is significantly worse than any other recession since World 
War II. The GDP decreased nearly 5 percent, and the Personal 
consumption in goods and services decreased 6.8 percent in the first 
quarter of 2020; in May 2020, personal income decreased 4.2 percent and 
the unemployment rate increased from 3.5 percent in February 2020 to 
11.1 percent in June 2020, and also for the month of June 2020, Non-
farm payroll decreased by 15 million since February 2020. Specifically 
for the sectors evaluated in this proposed rule, more recent data in 
June 2020 shows that the unemployment rate for Transportation and 
Utilities was 12.9 percent, for the sector of Information 12.0 percent 
and for the Financial Activities, 5.1 percent. In June 2019, the 
unemployment rates for these sectors were 3.7, 2.7 and 2 percent, 
respectively. The latest Federal Reserve Board's Monetary Policy Report 
shows that in general the most impacted firms in these sectors are 
small businesses.\3\.
---------------------------------------------------------------------------

    \3\ Board of Governors of the Federal Reserve System (June 
2020), Monetary Policy Report, p. 24 (see https://www.federalreserve.gov/monetarypolicy/files/20200612_mprfullreport.pdf) and U.S. Census Bureau, Small Busines 
Pulse Survey (https://portal.census.gov/pulse/data). The latest is a 
recent survey created by the Census Bureau to provide high-
frequency, detailed information on participation in small business-
specific initiatives such as the Paycheck Protection Program.
---------------------------------------------------------------------------

    Accordingly, in view of above impacts on small businesses from the 
COVID-19 pandemic and Federal government efforts to provide relief to 
small businesses and support to the overall economy, SBA proposes to 
increase size standards for 45 industries, and retain the current size 
standards for 81 industries even though analytical results suggest that 
69 of those 81 size standards could be lowered.
    The proposed size standards are presented in Table 11, Proposed 
Size Standards Revisions. Also presented in Table 11 are current and 
calculated size standards for comparison.

[[Page 62387]]



                                   Table 11--Proposed Size Standards Revisions
----------------------------------------------------------------------------------------------------------------
                                                   Calculated size        Proposed size         Current size
     NAICS codes         NAICS U.S. industry        standard  ($          standard  ($          standard  ($
                                title                 million)              million)              million)
----------------------------------------------------------------------------------------------------------------
481219..............  Other Nonscheduled Air                   $22.0                 $22.0                 $16.5
                       Transportation.
484110..............  General Freight                            9.0                  30.0                  30.0
                       Trucking, Local.
484121..............  General Freight                           22.0                  30.0                  30.0
                       Trucking, Long-
                       Distance, Truckload.
484122..............  General Freight                           38.0                  38.0                  30.0
                       Trucking, Long-
                       Distance, Less Than
                       Truckload.
484210..............  Used Household and                        21.0                  30.0                  30.0
                       Office Goods Moving.
484220..............  Specialized Freight                       15.0                  30.0                  30.0
                       (except Used Goods)
                       Trucking, Local.
484230..............  Specialized Freight                       22.0                  30.0                  30.0
                       (except Used Goods)
                       Trucking, Long-Distance.
485111..............  Mixed Mode Transit                        25.5                  25.5                  16.5
                       Systems.
485112..............  Commuter Rail Systems...                  41.5                  41.5                  16.5
485113..............  Bus and Other Motor                       28.5                  28.5                  16.5
                       Vehicle Transit Systems.
485119..............  Other Urban Transit                       33.0                  33.0                  16.5
                       Systems.
485210..............  Interurban and Rural Bus                  28.0                  28.0                  16.5
                       Transportation.
485310..............  Taxi Service............                  13.0                  16.5                  16.5
485320..............  Limousine Service.......                  12.5                  16.5                  16.5
485410..............  School and Employee Bus                   26.5                  26.5                  16.5
                       Transportation.
485510..............  Charter Bus Industry....                  13.0                  16.5                  16.5
485991..............  Special Needs                             13.0                  16.5                  16.5
                       Transportation.
485999..............  All Other Transit and                     16.0                  16.5                  16.5
                       Ground Passenger
                       Transportation.
486210..............  Pipeline Transportation                   36.5                  36.5                  30.0
                       of Natural Gas.
486990..............  All Other Pipeline                        31.5                  40.5                  40.5
                       Transportation.
487110..............  Scenic and Sightseeing                    18.0                  18.0                   8.0
                       Transportation, Land.
487210..............  Scenic and Sightseeing                    12.5                  12.5                   8.0
                       Transportation, Water.
487990..............  Scenic and Sightseeing                    22.0                  22.0                   8.0
                       Transportation, Other.
488111..............  Air Traffic Control.....                  30.5                  35.0                  35.0
488119..............  Other Airport Operations                  25.5                  35.0                  35.0
488190..............  Other Support Activities                  27.5                  35.0                  35.0
                       for Air Transportation.
488210..............  Support Activities for                    30.0                  30.0                  16.5
                       Rail Transportation.
488310..............  Port and Harbor                           38.0                  41.5                  41.5
                       Operations.
488320..............  Marine Cargo Handling...                  39.0                  41.5                  41.5
488330..............  Navigational Services to                  26.5                  41.5                  41.5
                       Shipping.
488390..............  Other Support Activities                  23.5                  41.5                  41.5
                       for Water
                       Transportation.
488410..............  Motor Vehicle Towing....                   7.0                   8.0                   8.0
488490..............  Other Support Activities                  16.0                  16.0                   8.0
                       for Road Transportation.
488510..............  Freight Transportation                    17.5                  17.5                  16.5
                       Arrangement.
488991..............  Packing and Crating.....                  17.5                  30.0                  30.0
488999..............  All Other Support                         22.0                  22.0                   8.0
                       Activities for
                       Transportation.
491110..............  Postal Services.........                   8.0                   8.0                   8.0
492210..............  Local Messengers and                      10.5                  30.0                  30.0
                       Local Delivery.
493110..............  General Warehousing and                   25.0                  30.0                  30.0
                       Storage.
493120..............  Refrigerated Warehousing                  32.0                  32.0                  30.0
                       and Storage.
493130..............  Farm Product Warehousing                  13.5                  30.0                  30.0
                       and Storage.
493190..............  Other Warehousing and                     32.0                  32.0                  30.0
                       Storage.
511210..............  Software Publishers.....                  40.0                  41.5                  41.5
512110..............  Motion Picture and Video                  33.0                  35.0                  35.0
                       Production.
512120..............  Motion Picture and Video                  26.0                  34.5                  34.5
                       Distribution.
512131..............  Motion Picture Theaters                   39.5                  41.5                  41.5
                       (except Drive-Ins).
512132..............  Drive-In Motion Picture                   11.0                  11.0                   8.0
                       Theaters.
512191..............  Teleproduction and Other                  19.5                  34.5                  34.5
                       Postproduction Services.
512199..............  Other Motion Picture and                  25.0                  25.0                  22.0
                       Video Industries.
512240..............  Sound Recording Studios.                   9.5                   9.5                   8.0
512290..............  Other Sound Recording                     20.0                  20.0                  12.0
                       Industries.
515111..............  Radio Networks..........                  41.5                  41.5                  35.0
515112..............  Radio Stations..........                  36.0                  41.5                  41.5
515120..............  Television Broadcasting.                  41.5                  41.5                  41.5
515210..............  Cable and Other                           41.5                  41.5                  41.5
                       Subscription
                       Programming.
517410..............  Satellite                                 38.5                  38.5                  35.0
                       Telecommunications.
517919..............  All Other                                 33.0                  35.0                  35.0
                       Telecommunications.
518210..............  Data Processing,                          33.0                  35.0                  35.0
                       Hosting, and Related
                       Services.
519110..............  News Syndicates.........                  32.0                  32.0                  30.0
519120..............  Libraries and Archives..                  18.5                  18.5                  16.5
519190..............  All Other Information                     26.5                  30.0                  30.0
                       Services.
522110..............  Commercial Banking......        750 million in        750 million in        600 million in
                                                              assets                assets                assets
522120..............  Savings Institutions....        750 million in        750 million in        600 million in
                                                              assets                assets                assets
522130..............  Credit Unions...........        750 million in        750 million in        600 million in
                                                              assets                assets                assets
522190..............  Other Depository Credit         750 million in        750 million in        600 million in
                       Intermediation.                        assets                assets                assets
522210..............  Credit Card Issuing.....        750 million in        750 million in        600 million in
                                                              assets                assets                assets

[[Page 62388]]

 
522220..............  Sales Financing.........                  38.0                  41.5                  41.5
522291..............  Consumer Lending........                  41.5                  41.5                  41.5
522292..............  Real Estate Credit......                  40.0                  41.5                  41.5
522293..............  International Trade                       31.0                  41.5                  41.5
                       Financing.
522294..............  Secondary Market                          41.5                  41.5                  41.5
                       Financing.
522298..............  All Other Nondepository                   35.5                  41.5                  41.5
                       Credit Intermediation.
522310..............  Mortgage and Nonmortgage                  13.0                  13.0                   8.0
                       Loan Brokers.
522320..............  Financial Transactions                    39.5                  41.5                  41.5
                       Processing, Reserve,
                       and Clearinghouse
                       Activities.
522390..............  Other Activities Related                  25.0                  25.0                  22.0
                       to Credit
                       Intermediation.
523110..............  Investment Banking and                    41.0                  41.5                  41.5
                       Securities Dealing.
523120..............  Securities Brokerage....                  37.0                  41.5                  41.5
523130..............  Commodity Contracts                       32.5                  41.5                  41.5
                       Dealing.
523140..............  Commodity Contracts                       26.5                  41.5                  41.5
                       Brokerage.
523210..............  Securities and Commodity                  33.0                  41.5                  41.5
                       Exchanges.
523910..............  Miscellaneous                             27.0                  41.5                  41.5
                       Intermediation.
523920..............  Portfolio Management....                  35.5                  41.5                  41.5
523930..............  Investment Advice.......                  27.5                  41.5                  41.5
523991..............  Trust, Fiduciary, and                     41.5                  41.5                  41.5
                       Custody Activities.
523999..............  Miscellaneous Financial                   41.5                  41.5                  41.5
                       Investment Activities.
524113..............  Direct Life Insurance                     37.5                  41.5                  41.5
                       Carriers.
524114..............  Direct Health and                         38.5                  41.5                  41.5
                       Medical Insurance
                       Carriers.
524127..............  Direct Title Insurance                    41.5                  41.5                  41.5
                       Carriers.
524128..............  Other Direct Insurance                    39.0                  41.5                  41.5
                       (except Life, Health,
                       and Medical) Carriers.
524130..............  Reinsurance Carriers....                  39.5                  41.5                  41.5
524210..............  Insurance Agencies and                    13.0                  13.0                   8.0
                       Brokerages.
524291..............  Claims Adjusting........                  18.0                  22.0                  22.0
524292..............  Third Party                               40.0                  40.0                  35.0
                       Administration of
                       Insurance and Pension
                       Funds.
524298..............  All Other Insurance                       27.0                  27.0                  16.5
                       Related Activities.
525110..............  Pension Funds...........                  32.5                 35.00                  35.0
525120..............  Health and Welfare Funds                  32.5                  35.0                  35.0
525190..............  Other Insurance Funds...                32.5.0                  35.0                  35.0
525910..............  Open-End Investment                       31.5                  35.0                  35.0
                       Funds.
525920..............  Trusts, Estates, and                    32.5.0                  35.0                  35.0
                       Agency Accounts.
525990..............  Other Financial Vehicles                  32.5                  35.0                  35.0
531110..............  Lessors of Residential                    23.5                  30.0                  30.0
                       Buildings and Dwellings.
531120..............  Lessors of                                28.0                  30.0                  30.0
                       Nonresidential
                       Buildings (except
                       Miniwarehouses).
531130..............  Lessors of                                20.5                  30.0                  30.0
                       Miniwarehouses and Self-
                       Storage Units.
531190..............  Lessors of Other Real                     16.0                  30.0                  30.0
                       Estate Property.
531210..............  Offices of Real Estate                    13.0                  13.0                   8.0
                       Agents and Brokers.
531311..............  Residential Property                      11.0                  11.0                   8.0
                       Managers.
531312..............  Nonresidential Property                   17.0                  17.0                   8.0
                       Managers.
531320..............  Offices of Real Estate                     8.5                   8.5                   8.0
                       Appraisers.
531390..............  Other Activities Related                  17.0                  17.0                   8.0
                       to Real Estate.
532111..............  Passenger Car Rental....                  41.5                  41.5                  41.5
532112..............  Passenger Car Leasing...                  41.0                  41.5                  41.5
532120..............  Truck, Utility Trailer,                   41.5                  41.5                  41.5
                       and RV (Recreational
                       Vehicle) Rental and
                       Leasing.
532210..............  Consumer Electronics and                  40.5                  41.5                  41.5
                       Appliances Rental.
532281..............  Formal Wear and Costume                   12.5                  22.0                  22.0
                       Rental.
532282..............  Video Tape and Disc                       31.0                  31.0                  30.0
                       Rental.
532283..............  Home Health Equipment                     36.0                  36.0                  35.0
                       Rental.
532284..............  Recreational Goods                         7.5                   8.0                   8.0
                       Rental.
532289..............  All Other Consumer Goods                  11.0                  11.0                   8.0
                       Rental.
532310..............  General Rental Centers..                   7.5                   8.0                   8.0
532411..............  Commercial Air, Rail,                     40.0                  40.0                  35.0
                       and Water
                       Transportation
                       Equipment Rental and
                       Leasing.
532412..............  Construction, Mining,                     34.0                  35.0                  35.0
                       and Forestry Machinery
                       and Equipment Rental
                       and Leasing.
532420..............  Office Machinery and                      32.5                  35.0                  35.0
                       Equipment Rental and
                       Leasing.
532490..............  Other Commercial and                      30.0                  35.0                  35.0
                       Industrial Machinery
                       and Equipment Rental
                       and Leasing.
533110..............  Lessors of Nonfinancial                   35.0                  41.5                  41.5
                       Intangible Assets
                       (except Copyrighted
                       Works).
----------------------------------------------------------------------------------------------------------------


[[Page 62389]]

    Table 12, Summary of Proposed Size Standards Revisions by Sector, 
below, summarizes the proposed changes to size standards in Table 11 
(above) by NAICS sector.

                        Table 12--Summary of Proposed Size Standards Revisions by Sector
----------------------------------------------------------------------------------------------------------------
                                                                  Size standards  Size standards  Size standards
             NAICS Sector                      Sector name           increased        lowered       maintained
----------------------------------------------------------------------------------------------------------------
48-49.................................  Transportation and                    18               0              25
                                         Warehousing (1).
51....................................  Information.............               8               0              11
52*...................................  Finance and Insurance                 10               0              29
                                         (2).
53....................................  Real Estate and Rental                 9               0              16
                                         and Leasing (3).
                                                                 -----------------------------------------------
All Sectors (3).......................  ........................              45               0              81
----------------------------------------------------------------------------------------------------------------

Evaluation of Dominance in Field of Operation

    SBA has determined that for the industries which it has evaluated 
in this proposed rule, no individual firm at or below the proposed size 
standard would be large enough to dominate its field of operation. At 
the proposed size standards levels, if adopted, the small business 
share of total industry receipts among those industries was, on 
average, 1.9 percent, varying from 0.01 percent to 33.3 percent. Also, 
at the proposed asset-based size standards levels, banks and thrifts 
have a share of 0.004 percent, with the minority institutions having a 
share of 0.32 percent. Credit unions have a market share of 0.05 
percent. These market shares effectively preclude a firm at or below 
the proposed size standards from exerting control on any of the 
industries.

Alternatives Considered

    By law, SBA is required to develop numerical size standards for 
establishing eligibility for Federal small business assistance programs 
and to review every five years all size standards and make necessary 
adjustments to reflect the current industry structure and Federal 
market conditions. Other than varying the levels of size standards by 
industry and changing the measures of size standards (e.g., using 
annual receipts vs. the number of employees), no practical alternatives 
exist to the systems of numerical size standards.
    The proposal is to increase size standards where the data suggested 
increases are warranted, and to retain, in response to the COVID-19 
national emergency and resultant economic impacts on small businesses, 
all current size standards where the data suggested lowering is 
appropriate.
    Nonetheless, SBA also considered two other alternatives. The 
alternative option one was to propose changes exactly as suggested by 
the analytical results. The alternative option two was to retain all 
current size standards.
    The first option would cause a substantial number of currently 
small businesses to lose their small business status and hence to lose 
their access to Federal small business assistance, especially small 
business set-aside contracts and SBA's financial assistance in some 
cases. During the first 5-year review of size standards, some 
commenters had expressed concerns about the SBA's policy of not 
lowering size standards based on the analytical results.
    As part of the option one, SBA considered but is not proposing to 
increase 45 size standards as suggested by analytical results and 
mitigate the impact of the decreases to size standards, by adjusting 
the calculated sizes considering the impact on small business access to 
Federal contracting and SBA loans. However, in the present situation 
with the global COVID-19 pandemic resulting in high levels of risk and 
dramatic reductions in economic activity of unprecedented nature, SBA 
presents only the impacts of adopting the analytical results without 
adjustment in alternative option one. SBA will adopt this approach 
temporarily and may reevaluate this approach as the economic situation 
evolves.
    Under the second option, given the current COVID-19 pandemic, SBA 
considered retaining the current level of all size standards even 
though the current analysis may suggest changing them. SBA considers 
that the option of retaining all size standards at this moment provides 
the opportunity to reassess the economic situation once the economic 
recovery starts. Under this option, as the current situation develops, 
SBA will be able to assess new data available on economic indicators, 
federal procurement, and SBA loans as well, before adopting changes to 
size standards. However, SBA is not adopting option two because the 
Regulatory Impact Analysis shows that retaining all size standards at 
their current levels is more onerous for the small businesses than the 
option of adopting increases of size standards and retaining the rest. 
SBA may reevaluate this approach as the current economic situation 
evolves.

Request for Comments

    SBA invites public comments on this proposed rule, especially on 
the following issues:
    1. SBA seeks feedback on whether SBA's proposal to increase 45 size 
standards and retain 81 size standards is appropriate given the results 
from the latest available industry and Federal contracting data of each 
industry and subindustry (exception) reviewed in this proposed rule, 
along with ongoing uncertainty and dramatic contraction in economic 
activity due to the global COVID-19 pandemic. SBA also seeks 
suggestions, along with supporting facts and analysis, for alternative 
standards, if they would be more appropriate than the proposed size 
standards.
    2. SBA also seeks comments on whether SBA should not lower any size 
standards in view of COVID-19 pandemic and its adverse impacts on small 
businesses as well as on the overall economic situation when analytical 
results suggest some size standards could be lowered. SBA believes that 
lowering size standards under the current economic environment would 
run counter to what Congress and Federal government are doing to aid 
and provide relief to the nation's small businesses impacted by the 
COVID-19 pandemic.
    3. Given the uncertainty produced by the global COVID-19 pandemic 
and the economic consequences, SBA would like to receive comments from 
the public on the possibility of lowering size standards while 
mitigating the consequences of the lower standards.
    4. Given the lack of industry data at the sub-industry level, SBA 
has

[[Page 62390]]

proposed to leave the size standard for Non-Vessel Owning Common 
Carriers and Household Good Forwarders (``exception'' under NAICS 
488510) at its current level. SBA invites comments, along with 
supporting information, on this proposal. Alternatively, in view of 
insignificant Government contracting, SBA also welcomes comments on 
whether it should continue to have a higher size standard for Non-
Vessel Owning Common Carriers and Household Good Forwarders as an 
``exception'' under NAICS 488510 or should it apply the same $17.5 
million proposed size standard for the overall industry. Finally, given 
the lack of industry data at the sub-industry level to accurately 
evaluate the size standard, SBA seeks comments on whether it should 
eliminate the exception and apply the overall size standard for NAICS 
488510.
    5. Because of the lack of data to review the industry structure, 
SBA has proposed to leave the size standard for Postal Service (NAICS 
491110) at the current level of $8 million in average annual revenue. 
SBA invites comments on this proposal as well as suggestions, along 
with supporting information, if a different size standard is more 
appropriate.
    6. As noted earlier, the 2012 Economic Census special tabulation 
includes data only for two NAICS codes within NAICS Subsector 525: 
NAICS 525910, Open-End Investment Funds, and NAICS 525990, Other 
Financial Vehicles. Because all industries in that Subsector currently 
share the same $35.0 million receipts based size standard, SBA applies 
the results based on data for NAICS 525910 and 525990, as shown in 
Table 4 (above), to all remaining industries within this Subsector, 
obtaining a common size standard of $32.5 million. While the reduced 
size standard represents a slight decrease from the current $35.0 
million level, SBA decided to retain the current size standards, 
although this would have virtually no impacts on the number of small 
firms nor on the amount of Federal contract dollars awarded to small 
firms under the current size standards. SBA invites comments or 
suggestions along with supporting information with respect to the 
following:
    a. Whether SBA should adopt common size standards for those 
industries or establish a separate size standard for each industry, and
    b. Whether the reduced common size standards for those industries 
are at the correct levels or what would be more appropriate if what SBA 
has proposed are not appropriate.
    7. Similarly, SBA proposes a $750 million common assets-based size 
standard for four industries within NAICS Industry Group 5221, 
Depository Credit Intermediation (i.e., NAICS 522110, 522120, 522130, 
and 522190) and on industry in NAICS 5222. Nondepository Credit 
Intermediation (i.e., NAICS 522210). SBA invites comments or 
suggestions along with supporting information with respect to whether 
SBA should adopt common size standards for those industries or 
establish a separate size standard for each industry.
    8. In calculating the overall industry size standard, SBA has 
assigned equal weight to each of the five primary factors in all 
industries and subindustries covered by this proposed rule. SBA seeks 
feedback on whether it should assign equal weight to each factor or on 
whether it should give more weight to one or more factors for certain 
industries or subindustries. Recommendations to weigh some factors 
differently than others should include suggested weights for each 
factor along with supporting facts and analysis.
    9. Finally, SBA seeks comments on data sources it used to examine 
industry and Federal market conditions, as well as suggestions on 
relevant alternative data sources that the Agency should evaluate in 
reviewing or modifying size standards for industries covered by this 
proposed rule.
    Public comments on the above issues are very valuable to SBA for 
validating its proposed size standards revisions in this proposed rule. 
Commenters addressing size standards for a specific industry or a group 
of industries should include relevant data and/or other information 
supporting their comments. If comments relate to the application of 
size standards for Federal procurement programs, SBA suggests that 
commenters provide information on the size of contracts in their 
industries, the size of businesses that can undertake the contracts, 
start-up costs, equipment and other asset requirements, the amount of 
subcontracting, other direct and indirect costs associated with the 
contracts, the use of mandatory sources of supply for products and 
services, and the degree to which contractors can mark up those costs.

Compliance With Executive Orders 12866 and 13771, the Regulatory 
Flexibility Act (5 U.S.C. 601-612), Executive Orders 13563, 12988, and 
13132, and the Paperwork Reduction Act (44 U.S.C. Ch. 35)

Executive Order 12866

    The Office of Management and Budget (OMB) has determined that this 
proposed rule is a significant regulatory action for purposes of 
Executive Order 12866. Accordingly, in the next section SBA provides a 
Regulatory Impact Analysis of this proposed rule, including: (1) A 
statement of the need for the proposed action, (2) an examination of 
alternative approaches, and (3) an evaluation of the benefits and 
costs--both quantitative and qualitative--of the proposed action and 
the alternatives considered. However, this rule is not a ``major rule'' 
under the Congressional Review Act, 5 U.S.C. 800.

Regulatory Impact Analysis

    1. What is a need for this regulatory action?
    Under the Small Business Act (Act) (15 U.S.C. 632(a)), SBA's 
Administrator is responsible for establishing small business size 
definitions (or ``size standards'') and ensuring that such definitions 
vary from industry to industry to reflect differences among various 
industries. The Jobs Act requires SBA to review every five years all 
size standards and make necessary adjustments to reflect current 
industry and Federal market conditions. This proposed rule is part of 
the second 5-year review of size standards in accordance with the Jobs 
Act. The first 5-year review of size standards was completed in early 
2016. Such periodic reviews of size standards provide SBA with an 
opportunity to incorporate ongoing changes to industry structure and 
Federal market environment into size standards and to evaluate the 
impacts of prior revisions to size standards on small businesses. This 
also provides SBA with an opportunity to seek and incorporate public 
input to the size standards review and analysis. SBA believes that 
proposed size standards revisions for industries being reviewed in this 
rule will make size standards more reflective of the current economic 
characteristics of businesses in those industries and the latest trends 
in Federal marketplace.
    SBA's mission is to aid and assist small businesses through a 
variety of financial, procurement, business development and counseling, 
and disaster assistance programs. To determine the actual intended 
beneficiaries of these programs, SBA

[[Page 62391]]

establishes numerical size standards by industry to identify businesses 
that are deemed small.
    The proposed revisions to the existing size standards for 126 
industries in NAICS Sectors 48-49, 51, 52 and 53 are consistent with 
SBA's statutory mandates to help small businesses grow and create jobs 
and to review and adjust size standards every five years. This 
regulatory action promotes the Administration's goals and objectives as 
well as meets the SBA's statutory responsibility. One of SBA's goals in 
support of promoting the Administration's objectives is to help small 
businesses succeed through fair and equitable access to capital and 
credit, Federal Government contracts and purchases, and management and 
technical assistance. Reviewing and modifying size standards, when 
appropriate, ensures that intended beneficiaries are able to access 
Federal small business programs that are designed to assist them to 
become competitive and create jobs.
    2. What are the potential benefits and costs of this regulatory 
action?
    OMB directs agencies to establish an appropriate baseline to 
evaluate any benefits, costs, or transfer impacts of regulatory actions 
and alternative approaches considered. The baseline should represent 
the agency's best assessment of what the world would look like absent 
the regulatory action. For a new regulatory action promulgating 
modifications to an existing regulation (such as modifying the existing 
size standards), a baseline assuming no change to the regulation (i.e., 
making no changes to current size standards) generally provides an 
appropriate benchmark for evaluating benefits, costs, or transfer 
impacts of proposed regulatory changes and their alternatives.

Proposed Changes to Size Standards

    Based on the results from analyses of latest industry and Federal 
contracting data, as well as consideration of the impact of size 
standards changes on small businesses and significant adverse impacts 
of the COVID-19 emergency on small businesses and the overall economic 
activity, of the total of 126 industries and exceptions in Sectors 48-
49, 51, 52 and 53 that have monetary-based size standards, SBA proposes 
to increase size standards for 45 industries, and maintain current size 
standards for remaining 79 industries and 2 exceptions.

The Baseline

    For purposes of this regulatory action, the baseline represents 
maintaining the ``status quo,'' i.e., making no changes to the current 
size standards. Using the number of small businesses and levels of 
benefits (such as set-aside contracts, SBA's loans, disaster 
assistance, etc.) they receive under the current size standards as a 
baseline, one can examine the potential benefits, costs and transfer 
impacts of proposed changes to size standards on small businesses and 
on the overall economy.
    Based on the 2012 Economic Census (the latest available), of a 
total of about 700,544 businesses in industries in Sectors 48-49, 51, 
52 (excluding assets-based size standards), and 53 for which SBA 
evaluated their current receipt based size standards, 97.2 percent are 
considered small under the current size standards. That percentage 
varies from 95.8 percent in Sector 51 to 97.9 percent in Sector 53. 
Additionally, based on the data from FDIC and National Credit Union 
Administration (NCUA), from a total of about 5,415 depository 
institutions. 77.3 percent corresponds to small depository 
institutions, and from a total of 5,492 credit unions, 91.2 percent are 
small under the current assets-based size standards. Based on the data 
from FPDS-NG for fiscal years 2016-2018, about 13,964 unique firms in 
those industries with receipts-based size standards received at least 
one Federal contract during that period, of which 76.8 percent were 
small under the current size standards. For these sectors, of $19.5 
billion in total average annual contract dollars awarded to businesses 
during that period, 21.2 percent went to small businesses. From the 
total small business contract dollars awarded during the period 
considered, 45.5 percent were awarded through various small business 
set-aside programs and 54.5 percent were awarded through non-set aside 
contracts. Based on the FDIC and NCUA data respectively, from a total 
of $18,034.4 billion in assets, 4.6 percent are owned by small 
depository institutions. With respect to Credit Unions, from a total of 
$1,470.8 billion in assets, 25.7 percent are owned by small credit 
unions.
    Based on the SBA's internal data on its loan programs for fiscal 
years 2016-2018, small businesses in those industries received, on an 
annual basis, a total of nearly 7,232 7(a) and 504 loans in that 
period, totaling about $2.7 billion, of which 84.6 percent was issued 
through the 7(a) program and 15.4 percent was issued through the 504/
CDC program. During fiscal years 2016-2018, small businesses in those 
industries also received 2,544 loans through the SBA's Economic Injury 
Disaster Loan (EIDL) program, totaling about $208.6 million on an 
annual basis. Table 13, Baseline for All Industries, below, provides 
these baseline results by sector, for receipts-based size standards 
industries and assets-based size standards industries.

Increases to Size Standards

    As stated above, of 126 monetary based size standards in Sectors 
48-49, 51, 52, and 53 that are reviewed in this rule, based on the 
results from analyses of latest industry and Federal market data as 
well as impacts of size standards changes on small businesses, in this 
rule, SBA proposes to increase 45 size standards, of which 40 are 
receipts-based and five assets-based. Below are descriptions of the 
benefits, costs, and transfer impacts of these proposed increases to 
size standards.

                                      Table 13--Baseline for All Industries
----------------------------------------------------------------------------------------------------------------
                                     Sector 48-49      Sector 51       Sector 52        Sector 53       Total
----------------------------------------------------------------------------------------------------------------
Baseline All Industries (current                43              19               39              25          126
 size standards)..................
    Total firms (Economic Census).         162,147          45,821          220,860         271,716      700,544
    Total small firms under                156,173          43,915          214,790         265,977      680,855
     current size standards
     (Economic Census)............
    Small firms as % of total                96.3%           95.8%            97.3%           97.9%        97.2%
     firms........................
    Total contract dollars ($             $8,190.0        $7,210.6         $2,997.6        $1,256.8    $22,522.6
     million) (FPDS-NG FY2016-
     2018)........................
    Total small business contract          $1238.0         $1861.9           $382.0          $668.6     $4,530.5
     dollars under current
     standards ($ million) (FPDS-
     NG FY2016-2018)..............
    Small business dollars as % of           15.1%           25.8%            12.2%           53.2%        20.1%
     total dollars (FPDS-NG FY2016-
     2018)........................

[[Page 62392]]

 
    Total No. of unique firms                4,017           5,634              572           4,276       14,005
     getting contracts (FPDS-NG
     FY2016-2018).................
    Total No. of unique small                3,117           4,058              309           3,432       10,691
     firms getting small business
     contracts (FPDS-NG FY2016-
     2018)........................
    Small business firms as % of             77.5%           72.0%           54.04%            80.3        76.3%
     total firms..................
    No. of 7(a) and 504/CDC loans            3,662             524            1,280           1,766        7,232
     (FY 2016-2018)...............
    Amount of 7(a) and 504 loans            $828.5          $210.5           $519.6        $1,135.6     $2,694.2
     ($ million) (FY 2016-2018)...
    No. of EIDL loans (FY 2016-                186              31               71           2,256        2,544
     2018)........................
    Amount of EIDL loans                     $12.5            $3.3             $3.6          $189.2       $208.6
     ($million) (FY 2016-2018)....
    Total Number of Depository      ..............  ..............            5,415  ..............  ...........
     Institutions (FDIC, SDI)
     (2018).......................
    Number of Small Depository      ..............  ..............            4,188  ..............  ...........
     Institutions (FDIC, SDI)
     (2018).......................
    Small firms as % of total       ..............  ..............            77.3%  ..............  ...........
     Depository Institutions
     (2018).......................
    Total Assets of Depository      ..............  ..............   $18,034,370.50  ..............  ...........
     Institutions ($ million)
     (FDIC, SDI) (2018)...........
    Total Assets of Small           ..............  ..............       $837,835.6  ..............  ...........
     Depository Institutions ($
     million) (FDIC, SDI) (2018)..
    SB Assets as % of Total Assets  ..............  ..............             4.6%  ..............  ...........
    Total Number of Credit Unions   ..............  ..............            5,492  ..............  ...........
     (NCUA) (2018)................
    Number of small Credit Unions   ..............  ..............            5,010  ..............  ...........
     (NCUA) (2018)................
    Small firms as % of total       ..............  ..............            91.2%  ..............  ...........
     Depository Institutions......
    Total Assets of Credit Unions   ..............  ..............     $1,470,838.7  ..............  ...........
     ($ million) (NCUA) (2018)....
    Total Assets of Small Credit    ..............  ..............       $377,619.2  ..............  ...........
     Unions ($ million) (NCUA)
     (2018).......................
    SB Assets as % of Total Assets  ..............  ..............           25.67%  ..............  ...........
     of Credit Unions.............
----------------------------------------------------------------------------------------------------------------

Benefits of Increases to Size Standards

    The most significant benefit to businesses from proposed increases 
to size standards is gaining eligibility for Federal small business 
assistance programs or retaining that eligibility for a longer period. 
These include SBA's business loan programs, EIDL program, and Federal 
procurement programs intended for small businesses. Federal procurement 
programs provide targeted, set-aside opportunities for small businesses 
under the SBA's various business development and contracting programs, 
such as 8(a)/BD (business development), small disadvantaged businesses 
(SDB), small businesses located in Historically Underutilized Business 
Zones (HUBZone), women-owned small businesses (WOSB), economically 
disadvantaged women-owned small businesses (EDWOSB), and service-
disabled veteran-owned small businesses (SDVOSB).
    Besides set-aside contracting and financial assistance discussed 
above, small businesses also benefit through reduced fees, less 
paperwork, and fewer compliance requirements that are available to 
small businesses through Federal government. However, SBA has no data 
to estimate the number of small businesses receiving such benefits.
    Based on the 2012 Economic Census (latest available SBA estimates 
that in 40 industries in NAICS Sectors 48-49, 51, 52, and 53 for which 
it has proposed to increase receipts-based size standards, more than 
1,790 firms (see Table 13 above), not small under the current size 
standards, will become small under the proposed size standards 
increases and therefore become eligible for these programs. That 
represents about 0.5 percent of all firms classified as small under the 
current size standards in industries for which SBA has proposed 
increasing size standards. If adopted, proposed size standards would 
result in an increase to the small business share of total receipts in 
those industries from 29.9 percent to 32.7 percent.
    With more businesses qualifying as small under the proposed 
increases to size standards, Federal agencies will have a larger pool 
of small businesses from which to draw for their small business 
procurement programs. Growing small businesses that are close to 
exceeding the current size standards will be able to retain their small 
business status for a longer period under the higher size standards, 
thereby enabling them to continue to benefit from the small business 
programs.
    Based on the FPDS-NG data for fiscal years 2016-2018, SBA estimates 
that about 60-65 firms that are active in Federal contracting in those 
industries would gain small business status under the proposed size 
standards. Based on the same data, SBA estimates that those newly 
qualified small businesses under the proposed increases to size 
standards, if adopted, could receive Federal small business contracts 
totaling about $30.0 million annually. That represents a 3.4 percent 
increase to small business dollars from the sector baseline.
    Based on the FDIC data for fiscal year 2018, SBA estimates that 
about 200 depository institutions would gain small institutions status 
under the proposed increases to size standards with an additional 
$132.4 billion or 15.8 percent increase in small depository 
institutions' assets. Also, based on the NCUA data for fiscal year 
2018, SBA estimates that about 85 credit unions would gain small 
business status under the proposed increases to size standards, with an 
additional $56 billion in assets or 14.9 percent increase for small 
credit unions.
    The added competition from more businesses qualifying as small can 
result in lower prices to the government for procurements set aside or 
reserved for small businesses, but SBA cannot quantify this impact. 
Costs could be higher when full and open contracts are awarded to 
HUBZone businesses that receive price evaluation preferences. However, 
with agencies likely setting aside more contracts for small businesses 
in response to the availability of a larger pool of small businesses 
under the proposed increases to size standards, HUBZone firms might

[[Page 62393]]

actually end up getting more set-aside contracts and fewer full and 
open contracts, thereby resulting in some cost savings to agencies. 
While SBA cannot estimate such costs savings as it is impossible to 
determine the number and value of unrestricted contracts to be 
otherwise awarded to HUBZone firms will be awarded as set-asides, such 
cost savings are likely to be relatively small as only a small fraction 
of full and open contracts are awarded to HUBZone businesses.
    Under SBA's 7(a) and 504 loan programs, based on the data for 
fiscal years 2016-2018, SBA estimates up to about 14 7(a) and 504 loans 
totaling about $5.7 million could be made to these newly qualified 
small businesses in those industries under the proposed size standards. 
That represents a 0.2 percent increase to the loan amount compared to 
the Group baseline.
    Newly qualified small businesses will also benefit from the SBA's 
EIDL program. Since the benefit provided through this program is 
contingent on the occurrence and severity of a disaster in the future, 
SBA cannot make a meaningful estimate of this impact. However, based on 
the historical trends of the EIDL data, SBA estimates that, on an 
annual basis, the newly defined small businesses under the proposed 
increases to size standards, if adopted, could receive 5 EIDL loans, 
totaling about $0.4 million. Additionally, the newly defined small 
businesses would also benefit through reduced fees, less paperwork, and 
fewer compliance requirements that are available to small businesses 
through the Federal government, but SBA has no data to quantify this 
impact. Table 14, Impacts of Proposed Increases to Size Standards, 
provides these results by NAICS sector.

                            Table 14--Impacts of Proposed Increases to Size Standards
----------------------------------------------------------------------------------------------------------------
                                     Sector 48-49      Sector 51       Sector 52        Sector 53       Total
----------------------------------------------------------------------------------------------------------------
No. of industries with proposed                 18               8               10               9           45
 increases to size standards......
Total current small businesses in           27,255           5,368          135,774         150,404      318,800
 industries with proposed
 increases to size standards
 (Economic Census 2012)...........
Additional firms qualifying as                 184              13              623             970        1,790
 small under proposed standards
 (2012 Economic Census)...........
Percentage of additional firms                0.7%            0.2%             0.5%            0.6%         0.6%
 qualifying as small relative to
 current small businesses in
 industries with proposed
 increases to size standards......
No. of current unique small firms              520             334              101           1,605        2,553
 getting small business contracts
 in industries with proposed
 increases to size standards (FPDS-
 NG FY2016-2018) \1\..............
Additional small business firms                 32               4                7              21           63
 getting small business status
 (FPDS-NG FY2016-2018)............
% increase to small businesses                6.2%            1.2%             6.9%            1.3%         2.5%
 relative to current unique small
 firms getting small business
 contracts in industries with
 proposed increases to size
 standards (FPDS-NG FY2016-2018)
 \1\..............................
Total small business contract               $238.5          $149.6           $160.8          $330.8       $879.7
 dollars under current standards
 in industries with proposed
 increases to size standards ($
 million) (FPDS-NG FY2016-2018)...
Estimated additional small                    $7.0            $2.0             $6.1           $15.0        $30.1
 business dollars available to
 newly qualified small firms
 (Using avg dollars obligated to
 SBs) ($ million) (FPDS-NG FY 2016-
 2018) \1\........................
% increase to small business                  2.9%            1.3%             3.8%            4.5%         3.4%
 dollars relative to total small
 business contract dollars under
 current standards in industries
 with proposed increases to size
 standards........................
Total no. of 7(a) and 504 loans to             412              58              726             745        1,941
 small business in industries with
 proposed increases to size
 standards (FY 2016-2018).........
Total amount of 7(a) and 504 loans          $160.6           $22.5           $246.0          $230.8       $659.9
 to small businesses in industries
 with proposed increases to size
 standards ($ million) (FY 2016-
 2018)............................
Estimated no. of 7(a) and 504                    4               1                4               5           14
 loans to newly qualified small
 firms............................
Estimated 7(a) and 504 loan                   $2.4            $0.4             $1.4            $1.5         $5.7
 amounts to newly qualified small
 firms ($ million)................
% increase to 7(a) and 504 loan               0.3%            0.2%             0.3%            0.1%         0.2%
 amounts relative to the total
 amount of 7(a) and 504 loans in
 industries with proposed
 increases to size standards......
Total no. of EIDL loans to small                57               9                0             127          193
 businesses in industries with
 proposed increases to size
 standards (FY 2016-2018).........
Total amount of EIDL loans to                 $4.9            $0.4             $2.2           $11.8        $19.3
 small businesses in industries
 with proposed increases to size
 standards ($ million) (FY 2016-
 2018)............................
Estimated no. of EIDL loans to                   2               1                1               1            5
 newly qualified small firms......
Estimated EIDL loan amount to                $0.20           $0.04            $0.05           $0.09         $0.4
 newly qualified small firms ($
 million).........................
% increase to EIDL loan amount                1.6%            1.2%             1.4%            0.0%         0.2%
 relative to the total amount of
 EIDL loans in industries with
 proposed increases to size
 standards........................
Total current small businesses in                                             4,188  ..............  ...........
 industries with Proposed
 increases to size standards
 (FDIC) (2018)....................

[[Page 62394]]

 
Additional firms qualifying as                                                  198  ..............  ...........
 small under proposed standards
 (FDIC)...........................
% Increase small institutions with                                             4.7%  ..............  ...........
 proposed increases to size
 standards........................
Total Assets of Small Depository                                         $837,835.6
 Institutions ($ million) (FDIC,
 SDI) (2018)......................
Estimated increase in total assets                                       $132,439.9
 of Small Depository Institutions
 ($ million)......................
% increase in total assets of                                                 15.8%
 small depository institutions....
Number of small Credit Unions                                                 5,010
 (NCUA) (2018)....................
Additional small Credit Unions                                                   84
 (NCUA)...........................
% Increase small institutions with                                             1.7%
 proposed increases to size
 standards........................
Total Assets of small Credit                                             $377,619.2
 Unions ($ million) (NCUA) (2018).
Estimated increase in total assets                                        $56,326.8
 of small Credit Unions ($
 million).........................
% increase in total assets of                                                 14.9%
 small Credit Unions..............
----------------------------------------------------------------------------------------------------------------
\1\ Additional dollars are calculated multiplying average small business dollars obligated per DUNS times change
  in number of firms. Numbers of firms are calculated using the SBA current size standard, not the CO Size Std-
  These calculations do not include assets-based industries.
\2\ Total impact represents total unique number of firms impacted to avoid double counting as some firms are
  participating in more than one industry. These calculations do not include assets-based industries.

Costs of Increases to Size Standards

    Besides having to register in SAM to be able to participate in 
Federal contracting and update the SAM profile annually, small 
businesses incur no direct costs to gain or retain their small business 
status as a result of increases to size standards. All businesses 
willing to do business with Federal government have to register in SAM 
and update their SAM profiles annually, regardless of their size 
status. SBA believes that a vast majority of businesses that are 
willing to participate in Federal contracting are already registered in 
SAM and update their SAM profiles annually. More importantly, this 
proposed rule does not establish the new size standards for the very 
first time; rather it just intends to modify the existing size 
standards in accordance with a statutory requirement and the latest 
data and other relevant factors.
    To the extent that the newly qualified small businesses (not 
depository institutions or credit unions) could become active in 
Federal procurement, the proposed increases to size standards, if 
adopted, may entail some additional administrative costs to the 
government as a result of more businesses qualifying as small for 
Federal small business programs. For example, there will be more firms 
seeking SBA loans, more firms eligible for enrollment in the Dynamic 
Small Business Search (DSBS) database or in certify.sba.gov, more firms 
seeking certification as 8(a)/BD or HUBZone firms or qualifying for 
small business, SDB, WOSB, EDWOSB, and SDVOSB status, and more firms 
applying for SBA's 8(a)/BD and all small business mentor-
prot[eacute]g[eacute] programs. With an expanded pool of small 
businesses, it is likely that Federal agencies would set aside more 
contracts for small businesses under the proposed increases to size 
standards. One may surmise that this might result in a higher number of 
small business size protests and additional processing costs to 
agencies. However, the SBA's historical data on size protests shows 
that the number of size protests decreased following the increases to 
receipts-based size standards as part of the first 5-year review of 
size standards. Specifically, on an annual basis, the number of size 
protests fell from about 600 during fiscal years 2011-2013 (review of 
most receipts-based size standards was completed by the end of FY 
2013), as compared to about 500 during fiscal years 2014-2016 when size 
standards increases were in effect. That represents a 17 percent 
decline. Among those newly defined small businesses seeking SBA's 
loans, there could be some additional costs associated with compliance 
and verification of their small business status. However, small 
business lenders have an option of using the tangible net worth and net 
income based alternative size standard instead of using the industry-
based size standards to establish eligibility for SBA's loans. For 
these reasons, SBA believes that these added administrative costs will 
be minor because necessary mechanisms are already in place to handle 
these added requirements.
    Additionally, some Federal contracts may possibly have higher 
costs. With a greater number of businesses defined as small due to the 
proposed increases to size standards, Federal agencies may choose to 
set aside more contracts for competition among small businesses only 
instead of using a full and open competition. The movement of contracts 
from unrestricted competition to small business set-aside contracts 
might result in competition among fewer total bidders, although there 
will be more small businesses eligible to submit offers under the 
proposed size standards. However, the additional costs associated with 
fewer bidders are expected to be minor since, by law, procurements may 
be set aside for small businesses under the 8(a)/BD, SDB, HUBZone, 
WOSB, EDWOSB, or SDVOSB programs only if awards are expected to be made 
at fair and reasonable prices.
    Costs may also be higher when full and open contracts are awarded 
to HUBZone businesses that receive price evaluation preferences. 
However, with agencies likely setting aside more contracts for small 
businesses in response to the availability of a larger pool of small 
businesses under the proposed increases to size standards, HUBZone 
firms might actually end up getting fewer full and open contracts, 
thereby resulting in some cost savings to agencies. However, such cost 
savings are likely to be minimal as only a small fraction of 
unrestricted contracts are awarded to HUBZone businesses.

Transfer Impacts of Increases to Size Standards

    The proposed increases to size standards, if adopted, may result in 
some redistribution of Federal contracts

[[Page 62395]]

between the newly qualified small businesses and large businesses and 
between the newly qualified small businesses and small businesses under 
the current standards. However, it would have no impact on the overall 
economic activity since total Federal contract dollars available for 
businesses to compete for will not change with changes to size 
standards. While SBA cannot quantify with certainty the actual outcome 
of the gains and losses from the redistribution contracts among 
different groups of businesses, it can identify several probable 
impacts in qualitative terms. With the availability of a larger pool of 
small businesses under the proposed increases to size standards, some 
unrestricted Federal contracts which would otherwise be awarded to 
large businesses may be set aside for small businesses. As a result, 
large businesses may lose some Federal contracting opportunities. 
Similarly, some small businesses under the current size standards may 
obtain fewer set-aside contracts due to the increased competition from 
more advanced businesses qualifying as small under the proposed 
increases to size standards. This impact may be offset by a greater 
number of procurements being set aside for all small businesses. With 
larger businesses qualifying as small under the higher size standards, 
smaller small businesses could face some disadvantage in competing for 
set aside contracts against their larger counterparts. However, SBA 
cannot quantify these impacts.
    3. What alternatives have been considered?
    Under OMB Circular A-4, SBA is required to consider regulatory 
alternatives to the proposed changes in the proposed rule. In this 
section, SBA describes and analyzes two such alternatives to the 
proposed rule. Alternative Option One to the proposed rule, a more 
stringent option to the proposed rule, would propose adopting size 
standards based solely on the analytical results. In other words, the 
size standards of 45 industries for which the analytical results 
suggest raising size standards would be raised, and the size standards 
of 69 industries for which the analytical results suggest lowering size 
standards would be lowered. Size standards for the remaining 12 
industries would be maintained at their current levels. Alternative 
Option Two, would propose retaining all size standards for all 
industries, given the uncertainty generated by the ongoing COVID-19 
pandemic. Below, SBA discusses and presents the net impacts of each 
option.

Alternative Option One: Consider Adopting All Calculated Size Standards

    As discussed elsewhere in this proposed rule, Alternative Option 
One would cause a substantial number of currently small businesses to 
lose their small business status and hence to lose their access to 
Federal small business assistance, especially small business set-aside 
contracts and SBA's financial assistance in some cases. These 
consequences could be mitigated. For example, in response to the 2008 
Financial Crisis and economic conditions that followed, SBA adopted a 
general policy in the first 5-year comprehensive size standards review 
to not lower any size standard (except to exclude one or more dominant 
firms) even when the analytical results suggested the size standard 
should be lowered. Currently, because of the economic challenges 
presented by the COVID-19 pandemic and the measures taken to protect 
public health, SBA has decided to propose the same general policy of 
not lowering size standards in the second 5-year comprehensive size 
standards review as well.
    The primary benefit of adopting Alternative Option One is that 
SBA's procurement, management, technical and financial assistance 
resources would be targeted to the most appropriate beneficiaries of 
such programs according to the analytical results. Adopting the size 
standards suggested by the analytical results would also promote 
consistency with analytical results in SBA's exercise of its authority 
to determine size standards. SBA seeks public comment on the impact of 
adopting the size standard as suggested by the analytical results.
    As explained in the Size Standards Methodology White Paper, in 
addition to adopting all results of the primary analysis, SBA evaluates 
other relevant factors as needed such as the impact of the reductions 
or increases of size standards on the distribution of contracts awarded 
to small businesses, and may adopt different results with the intention 
of mitigating potential negative impacts.
    We have discussed already the benefits and costs of increasing 45 
size standards. Below we discuss the benefits and costs of decreasing 
69 size standards.

Benefits of Decreases to Size Standards

    The most significant benefit to businesses from decreases to size 
standards when the SBA's analysis suggests such decreases is to ensure 
that size standards are more reflective of latest industry structure 
and Federal market trends and that Federal small business assistance is 
more effectively targeted to its intended beneficiaries. These include 
SBA's loan programs, EIDL program, and Federal procurement programs 
intended for small businesses. Federal procurement programs provide 
targeted, set-aside opportunities for small businesses under SBA's 
business development programs, such as small business, 8(a)/BD, SDB 
HUBZone, WOSB, EDWOSB, and SDVOSB programs. The adoption of smaller 
size standards when the results support them diminishes the risk of 
awarding contracts to firms which are not small anymore.
    Decreasing size standards may reduce the administrative costs of 
the government, because the risk of awarding contracts to other than 
small businesses may diminish when the size standards reflect better 
the structure of the market. The risks of providing SBA's loans to 
firms that are not needing them the most, or allowing firms that are 
not eligible for small business set-asides or to participate on the SBA 
procurement programs will provide for a better chance for smaller firms 
to grow and benefit from the opportunities available on the Federal 
market, and strengthen the small business industrial base for the 
Federal Government.

Costs of Decreases to Size Standards

    With fewer businesses qualifying as small under the decreases to 
size standards, Federal agencies will have a smaller pool of small 
businesses from which to draw for their small business procurement 
programs. For example, in Option One, during fiscal years 2016-2018, 
agencies awarded, on an annual basis, about $3,118 million in small 
business contracts in those 69 industries for which this Option 
considered decreasing size standards. Table 15, Impacts of Decreases of 
Size Standards Under Alternative Option One, below shows that lowering 
69 size standards would reduce Federal contract dollars awarded to 
small businesses by $59.0 million or about 1.9 percent relative to the 
baseline level, of which more than 50 percent are accounted for by the 
Transportation and Warehousing sector (NAICS 48-49). Because of the 
importance of this sector for Federal procurement, SBA would adopt 
mitigating measures to reduce the negative impact under the assumptions 
of Option One. SBA could adopt one or more of the following three 
actions: 1. to accept decreases in size standards as suggested by the 
analytical results, 2. to decrease size standards by a smaller amount 
than the calculated threshold,

[[Page 62396]]

and 3. to retain the size standards at their current levels.
    Nevertheless, since Federal agencies are still required to meet the 
statutory small business contracting goal of 23 percent, actual impacts 
on the overall set aside activity is likely to be smaller as agencies 
are likely to award more set aside contracts to small businesses that 
continue to remain small under the reduced size standards.
    With fewer businesses qualifying as small, the decreased 
competition can also result in higher prices to the Government for 
procurements set aside or reserved for small businesses, but SBA cannot 
quantify this impact. Decreases to size standards would have a very 
minor impact on small businesses applying for SBA's 7(a) and 504 loans 
because a vast majority of such loans are issued to businesses that are 
far below the reduced size standards. For example, based on the loan 
data for fiscal years 2016-2018, Option One estimates that about 36 
7(a) and 504 loans with total amounts of $10.7 million could not be 
available to those small businesses that would lose eligibility under 
the reduced size standards. That represents about a 0.5 percent 
decrease of the loan amounts compared to the baseline. Table 15 below 
shows these results by sector. However, the actual impact could be much 
less as businesses losing small business eligibility under the 
decreases to industry-based size standards could still qualify for 
SBA's loans under the tangible net worth and net income based 
alternative size standard.
    Businesses losing small business status would also be impacted in 
terms of access to loans through the SBA's EIDL program. However, SBA 
expects such impact to be minimal as only a small number of businesses 
in those industries received such loans during fiscal years 2016-2018. 
Additionally, all those businesses were below the reduced size 
standards. Since this program is contingent on the occurrence and 
severity of a disaster in the future, SBA cannot make a meaningful 
estimate of this impact.
    Small businesses becoming other than small if size standards were 
decreased might lose benefits through reduced fees, less paperwork, and 
fewer compliance requirements that are available to small businesses 
through Federal government, but SBA has no data to quantify this 
impact. However, if agencies determine that SBA's size standards do not 
adequately serve such purposes, they can establish a different size 
standard with an approval from SBA if they are required to use SBA's 
size standards for their programs.

Transfer Impacts of Decreases to Size standards

    If the size standards were decreased under Alternative Option One, 
it may result in a redistribution of Federal contracts between small 
businesses losing the small business status and large businesses and 
between small businesses losing the small business status and small 
businesses remaining small under the reduced size standards. However, 
as under the proposed increases to size standards, it would have no 
impact on the overall economic activity since total Federal contract 
dollars available for businesses to compete for will stay the same. 
While SBA cannot estimate with certainty the actual outcome of the 
gains and losses among different groups of businesses from contract 
redistribution resulting from decreases to size standards, it can 
identify several probable impacts. With a smaller pool of small 
businesses under the decreases to size standards, some set-aside 
Federal contracts to be otherwise awarded to small businesses may be 
competed in unrestricted basis. As a result, large businesses may have 
more Federal contracting opportunities. However, because agencies are 
still required by law to award 23 percent of dollars to small 
businesses, SBA expects the movement of set-aside contracts to 
unrestricted competition to be limited. For the same reason, small 
businesses remaining small under the reduced size standards are likely 
to obtain more set aside contracts due to the reduced competition from 
fewer businesses qualifying as small under the decreases to size 
standards. With some larger small businesses losing small business 
status under the decreases to size standards, smaller small businesses 
would likely become more competitive in obtaining set aside contracts. 
However, SBA cannot quantify these impacts.

Net Impact of Alternative Option One

    To estimate the net impacts of Alternative Option One, SBA followed 
the same methodology used to evaluate the impacts of the proposed size 
standards (see Table 14 above). However, under Alternative Option One, 
SBA used the calculated size standards instead of the proposed ones to 
determine the impacts of changes to current thresholds. The impact of 
the increases of the calculated size standards were already shown in 
Table 14 above. Table 15 above and Table 16, Net Impacts of Size 
Standards Changes under Alternative Option One, below present the 
impact of the decreases of size standards and the net impact of 
adopting the calculated results under Alternative Option One, 
respectively.
    Based on the 2012 Economic Census, SBA estimates that in 114 
industries in NAICS Sectors 48-49, 51, 52 and 53 for which the 
analytical results suggested to change size standards, about 52 firms 
(see Table 16, below), would become small under the Option One. That 
represents about 0.01 percent of all firms classified as small under 
the current size standards.
    Based on the FPDS-NG data for fiscal years 2016-2018, SBA estimates 
that about 89 active firms in Federal contracting in those industries 
would lose small business status under Alternative Option One, most of 
them from the Transportation and Warehousing Sector (NAICS 48-49). This 
represents a decrease of about 0.9 percent of the total number of small 
businesses participating in Federal contracting under the current size 
standards. Based on the same data, SBA estimates that about $29.2 
million of Federal procurement dollars would not be available to firms 
losing their small status. This represents a decrease of 0.7 percent 
from the Group's baseline. Again, most of the losses are accounted for 
by the NAICS 48-49 Sector.
    Based on the SBA's loan data for fiscal years 2016-2018, the total 
number of 7(a) and 504 loans may decrease by about 22 loans, and the 
loan amounts by about $5.0 million. This represents a 0.4 percent 
decrease of the loan amounts relative to the Group baseline.
    Firms' Participation under the SBA's EIDL program will be affected 
as well. Since the benefit provided through this program is contingent 
on the occurrence and severity of a disaster in the future, SBA cannot 
make a meaningful estimate of this impact. However, based on the 
historical trends of the EIDL data, SBA estimates that, on an annual 
basis, the net impact of the Option One on additional firms is a 
reduction of five (5) loans, and a reduction of loans amounts by $0.45 
million for the Group relative to the baseline. Table 16 provides these 
results by NAICS sector.

[[Page 62397]]



                  Table 15--Impacts of Decreases of Size Standards Under Alternative Option One
----------------------------------------------------------------------------------------------------------------
                                     Sector 48-49      Sector 51       Sector 52        Sector 53       Total
----------------------------------------------------------------------------------------------------------------
No. of industries for which SBA                 23               9               24              13           69
 considered decreasing size
 standards (2012 Economic Census).
Total current small businesses in          133,032          39,030           76,036         114,495      510,777
 industries for which SBA
 considered decreasing size
 standards (2012 Economic Census).
Estimated no. of firms losing                1,086              72              246             234        1,738
 small status for which SBA
 considered decreasing size
 standards (2012 Economic Census).
% of Firms losing small status               0.50%           0.19%            0.34%           0.21%        0.92%
 relative to current small
 businesses in industries for
 which SBA considered decreasing
 size standards...................
No. of current unique small firms            2,668           3,592              155           1,652        7,942
 getting small business contracts
 in industries for which SBA
 considered decreasing size
 standards (FPDS-NG FY2016-2018)
 \1\..............................
Estimated number of small business              89              19                6              36          143
 firms that would have lost small
 business status in the decreases
 that SBA considered..............
% decrease to small business firms            3.3%            0.5%             3.9%            2.2%         1.8%
 relative to current unique small
 firms getting small business
 contracts in industries for which
 SBA considered decreasing size
 standards (FPDS-NG FY2016-2018)
 \1\..............................
Total small business contract                 $995          $1,697           $106.0          $320.0       $3,118
 dollars under current size
 standards in industries for which
 SBA considered decreasing size
 standards ($ million) (FPDS-NG
 FY2016-2018).....................
Estimated small business dollars               $30             $14               $8              $7          $59
 not available to firms that would
 have lost business status (Using
 avg dollars obligated to SBs) ($
 million) \1\ (FPDS-NG FY 2016-
 2018)............................
% decrease to small business                  3.0%            0.8%             7.8%            2.2%         1.9%
 dollars relative to total small
 business contract dollars under
 current size standards in
 industries for which SBA
 considered decreasing to size
 standards........................
Total no. of 7(a) and 504 loans to           3,250             457              516             964        5,187
 small businesses in industries
 for which SBA considered
 decreasing size standards (FY
 2016-2018).......................
Total amount of 7(a) and 504 loans          $668.0          $183.0           $262.5          $883.0     $1,996.5
 to small businesses in industries
 for which SBA considered
 decreasing size standards ($
 million) (FY 2016-2018)..........
Estimated no. of 7(a) and 504                   30               1                2               3           36
 loans not available to firms that
 would have lost small business
 status...........................
Estimated 7(a) and 504 loan                   $6.5            $0.4             $1.0            $2.7        $10.7
 amounts not available to firms
 that would have small status ($
 million).........................
% decrease to 7(a) and 504 loan               1.0%            0.2%             0.4%            0.3%         0.5%
 amounts relative to the total
 amount of 7(a) and 504 loans in
 industries for which SBA
 considered decreasing size
 standards........................
Total no. of EIDL loans to small               129              21               21           2,124        2,295
 businesses in industries for
 which SBA considered decreasing
 size standards (FY 2016-2018)....
Total amount of EIDL loans to                 $7.6            $2.7             $1.3          $176.9       $188.5
 small businesses in industries
 for which SBA considered
 decreasing size standards ($
 million) (FY 2016-2018)..........
Estimated no. of EIDL loans not                  3               1                1               5           10
 available to firms that would
 have lost small business status..
Estimated EIDL loan amount not                $0.2            $0.1             $0.1            $0.4         $0.8
 available to firms that would
 have lost small business status
 ($ million)......................
% decrease to EIDL loan amount                3.0%            4.8%             4.8%            0.2%         0.4%
 relative to the baseline.........
----------------------------------------------------------------------------------------------------------------
\1\ Additional dollars are calculated multiplying average small business dollars obligated per DUNS times change
  in number of firms.
\2\ Total impact represents total unique industries impacted to avoid double counting as some industries have
  large firms gaining small business status and small firms extending small business status.


                  Table 16--Net Impacts of Size Standards Changes Under Alternative Option One
----------------------------------------------------------------------------------------------------------------
                                     Sector 48-49      Sector 51       Sector 52        Sector 53       Total
----------------------------------------------------------------------------------------------------------------
No. of industries with proposed                 41              17               34              22          114
 changes to size standards........
Total no. of small businesses              156,173        42,803.4          208,456         265,559      669,991
 under the current size standards
 (2012 Economic Census)...........
Additional firms qualifying as              -1,002             -60              377             736           52
 small under proposed size
 standards (2012 Economic Census).
% of additional firms qualifying            -0.64%          -0.14%            0.18%            0.3%        0.01%
 as small relative to total
 current small businesses.........

[[Page 62398]]

 
No. of current unique small firms            3,100           3,872              257           3,215       10,264
 getting small business contracts
 (FPDS-NG FY2016-2018) \1\........
Additional small firms getting                 -60             -14                1             -16          -89
 small business status (FPDS-NG
 FY2016-2018).....................
% increase to small firms relative           -1.9%           -0.4%             0.4%           -0.5%        -0.9%
 to current unique small firms
 getting small business contracts
 (FPDS-NG FY2016-2018) \1\........
Total small business contract             $1,234.2        $1,846.0           $267.3          $650.6       $3,999
 dollars under current size
 standards ($ million) (FPDS-NG
 FY2016-2018).....................
Estimated small business dollars            -$23.5          -$11.5           -$2.02             7.9       -$29.2
 available to newly qualified
 small firms ($ million) (FPDS-NG
 FY 2016-2018) \1\................
% increase to dollars relative to             1.9%           0.63%            0.75%           1.21%       -0.73%
 total small business contract
 dollars under current size
 standards........................
Total no. of 7(a) and 504 loans to           3,662             524            1,280           1,766        7,232
 small businesses (FY 2016-2018)..
Total amount of 7(a) and 504 loans          $828.5          $210.5           $519.6        $1,135.6     $2,694.2
 to small businesses (FY 2016-
 2018)............................
Estimated no. of additional 7(a)               -26               0                2               2          -22
 and 504 loans to newly qualified
 small firms......................
Estimated additional 7(a) and 504            -$4.1            $0.0             $0.3           -$1.2        -$5.0
 loan amount to newly qualified
 small firms ($ million)..........
% increase to 7(a) and 504 loan              -0.5%            0.0%            0.07%          -0.11%        -0.4%
 amount relative to the total
 amount of 7(a) and 504 loans to
 small businesses.................
Total no. of EIDL loans to small               186              31               71           2,256        2,544
 businesses (FY 2016-2018)........
Total amount of EIDL loans to                $12.5            $3.3             $3.6          $189.2       $208.6
 small businesses (FY 2016-2018)..
Estimated no. of additional EIDL                -1               0                0              -4           -5
 loans to newly qualified small
 firms............................
Estimated additional EIDL loan              -$0.03           -$0.1             $0.0           -$0.3       -$0.45
 amount to newly qualified small
 firms ($ million)................
% increase to EIDL loan amount               -0.2%           -2.7%            -0.3%           -0.2%        -0.2%
 relative to the total amount of
 EIDL loans to small businesses...
Total current small businesses in   ..............  ..............            4,188  ..............  ...........
 industries with Proposed
 increases to size standards
 (FDIC) (2018)....................
Additional firms qualifying as      ..............  ..............              198  ..............  ...........
 small under proposed standards
 (FDIC)...........................
% Increase small institutions with  ..............  ..............             4.7%  ..............  ...........
 proposed increases to size
 standards........................
Total Assets of Small Depository    ..............  ..............       $837,835.6  ..............  ...........
 Institutions (FDIC, SDI) (2018)..
Estimated increase in total assets  ..............  ..............      $132,439.90  ..............  ...........
 of Small Depository Institutions.
% increase in total assets of       ..............  ..............            15.8%  ..............  ...........
 Small depository institutions....
Number of small Credit Unions       ..............  ..............            5,010  ..............  ...........
 (NCUA) (2018)....................
Additional small Credit Unions      ..............  ..............               84  ..............  ...........
 (NCUA)...........................
% Increase small institutions with  ..............  ..............             1.7%  ..............  ...........
 proposed increases to size
 standards........................
Total Assets of small Credit        ..............  ..............       $377,619.2  ..............  ...........
 Unions (NCUA) (2018).............
Estimated increase in total assets  ..............  ..............       $56,326.80  ..............  ...........
 of Small Credit Unions...........
% increase in total assets of       ..............  ..............            14.9%  ..............  ...........
 small Credit Unions..............
----------------------------------------------------------------------------------------------------------------
\1\ Additional dollars are calculated multiplying average small business dollars obligated per DUNS times change
  in number of firms.
\2\ Total impact represents total unique industries impacted to avoid double counting as some industries have
  large firms gaining small business status and small firms extending small business status.

Alternative Option Two: To Retain all Current Size Standards

    Under this alternative, given the current COVID-19 pandemic, as 
discussed elsewhere, SBA considered retaining the current level of all 
size standards even though the current analysis may suggest changing 
them. SBA considers that the option of retaining all size standards at 
this moment provides the opportunity to reassess the economic situation 
once the economic recovery starts. Under this option, as the current 
situation develops, SBA will be able to assess new data available on 
economic indicators, federal procurement, and SBA loans as well. SBA 
estimates a net impact of zero for this option, when compared to the 
baseline. However, if we compare the proposal of adopting 45 increases 
to size standards with this alternative approach, the benefits for 
small businesses of adopting the former will not be attained.

Executive Order 13771

    This proposed rule is not subject to the requirements of E.O. 13771 
because SBA has determined that most of the rule's impacts are income 
transfers between small and other than small businesses. According to 
the E.O. 13771 guidance in OMB M-17-21, dated April 5, 2017 (``E.O. 
13771 Guidance''), ``transfers'' are not covered by E.O. 13771. The 
E.O. 13771 Guidance also states that ``in some cases, [transfer rules] 
may impose requirements apart

[[Page 62399]]

from transfers, or transfers may distort markets causing 
inefficiencies. In those cases, the actions would need to be offset to 
the extent they impose more than de minimis costs.'' SBA estimates that 
this rulemaking would impose only de minimis costs on small businesses 
and would result in negligible compliance costs. Thus, SBA has 
determined that this rulemaking is exempt from the requirements of E.O. 
13771. Details on the estimated costs of this proposed rule can be 
found in the Regulatory Impact Analysis above.

Initial Regulatory Flexibility Analysis

    According to the Regulatory Flexibility Act (RFA), 5 U.S.C. 601-
612, when an agency issues a rulemaking, it must prepare a regulatory 
flexibility analysis to address the impact of the rule on small 
entities.
    This proposed rule, if adopted, may have a significant impact on a 
substantial number of small businesses in the industries covered by 
this proposed rule. As described above, this rule may affect small 
businesses seeking Federal contracts, loans under SBA's 7(a), 504 and 
EIDL Programs, and assistance under other Federal small business 
programs.
    Immediately below, SBA sets forth an initial regulatory flexibility 
analysis (IRFA) of this proposed rule addressing the following 
questions: (1) What are the need for and objective of the rule?; (2) 
What are SBA's description and estimate of the number of small 
businesses to which the rule will apply?; (3) What are the projected 
reporting, record keeping, and other compliance requirements of the 
rule?; (4) What are the relevant Federal rules that may duplicate, 
overlap, or conflict with the rule?; and (5) What alternatives will 
allow the Agency to accomplish its regulatory objectives while 
minimizing the impact on small businesses?
    1. What is the need for and objective of the rule?
    Changes in industry structure, technological changes, productivity 
growth, mergers and acquisitions, and updated industry definitions have 
changed the structure of many the industries covered by this proposed 
rule. Such changes can be enough to support revisions to current size 
standards for some industries. Based on the analysis of the latest data 
available, SBA believes that the revised standards in this proposed 
rule more appropriately reflect the size of businesses that need 
Federal assistance. The 2010 Jobs Act also requires SBA to review all 
size standards and make necessary adjustments to reflect market 
conditions.
    2. What are SBA's description and estimate of the number of small 
businesses to which the rule will apply?
    Based on data from the 2012 Economic Census, SBA estimates that 
there are about 319,000 small firms covered by this rulemaking under 
industries with proposed changes to size standards. If the proposed 
rule is adopted in its present form, SBA estimates that an additional 
1,790 businesses will become small.
    3. What are the projected reporting, record keeping and other 
compliance requirements of the rule?
    The proposed size standard changes impose no additional reporting 
or record keeping requirements on small businesses. However, qualifying 
for Federal procurement and a number of other programs requires that 
businesses register in SAM and self-certify that they are small at 
least once annually. Therefore, businesses opting to participate in 
those programs must comply with SAM requirements. There are no costs 
associated with SAM registration or certification. Changing size 
standards alters the access to SBA's programs that assist small 
businesses but does not impose a regulatory burden because they neither 
regulate nor control business behavior.
    4. What are the relevant Federal rules, which may duplicate, 
overlap or conflict with the rule?
    Under section 3(a)(2)(C) of the Small Business Act, 15 U.S.C. 
632(a)(2)(c), Federal agencies must use SBA's size standards to define 
a small business, unless specifically authorized by statute to do 
otherwise. In 1995, SBA published in the Federal Register a list of 
statutory and regulatory size standards that identified the application 
of SBA's size standards as well as other size standards used by Federal 
agencies (60 FR 57988 (November 24, 1995)). SBA is not aware of any 
Federal rule that would duplicate or conflict with establishing size 
standards.
    However, the Small Business Act and SBA's regulations allow Federal 
agencies to develop different size standards if they believe that SBA's 
size standards are not appropriate for their programs, with the 
approval of SBA's Administrator (13 CFR 121.903). The Regulatory 
Flexibility Act authorizes an Agency to establish an alternative small 
business definition, after consultation with the Office of Advocacy of 
the U.S. Small Business Administration (5 U.S.C. 601(3)).
    5. What alternatives will allow the Agency to accomplish its 
regulatory objectives while minimizing the impact on small entities?
    By law, SBA is required to develop numerical size standards for 
establishing eligibility for Federal small business assistance 
programs. Other than varying size standards by industry and changing 
the size measures, no practical alternative exists to the systems of 
numerical size standards.
    However, SBA considered two alternatives to its proposal to 
increase 45 size standards and maintain 81 size standards at their 
current levels. The first alternative SBA considered was adopting size 
standards based solely on the analytical results. In other words, the 
size standards of 45 industries for which the analytical results 
suggest raising size standards would be raised. However, the size 
standards of 69 industries for which the analytical results suggest 
lowering size standards would be lowered. This would cause a 
significant number of small businesses to lose their small business 
status. Under the second alternative, in view of the COVID-19 pandemic, 
SBA considered retaining all size standards at the current levels, even 
though the analytical results may suggest increasing 45 size standards 
and decreasing 69. Retaining all size standards at their current levels 
would be more onerous for the small businesses than the option of 
adopting 45 increases and retaining the rest of size standards, as 
proposed.

Executive Order 13563

    Executive Order 13563 emphasizes the importance of quantifying both 
costs and benefits, reducing costs, harmonizing rules, and promoting 
flexibility. A description of the need for this regulatory action and 
benefits and costs associated with this action including possible 
distributional impacts that relate to Executive Order 13563 is included 
above in the Regulatory Impact Analysis under Executive Order 12866. 
Additionally, Executive Order 13563, section 6, calls for retrospective 
analyses of existing rules.
    The review of size standards in the industries covered by this 
proposed rule is consistent with section 6 of Executive Order 13563 and 
the 2010 Jobs Act which requires SBA to review all size standards and 
make necessary adjustments to reflect market conditions. Specifically, 
the 2010 Jobs Act requires SBA to review at least one-third of all size 
standards during every 18-month period from the date of its enactment 
(September 27, 2010) and to review all size standards not less 
frequently than once every five years, thereafter. SBA had already 
launched a comprehensive review of size standards in 2007. In 
accordance with the Jobs

[[Page 62400]]

Act, SBA completed the comprehensive review of the small business size 
standard for each industry, except those for agricultural enterprises 
previously set by Congress, and made appropriate adjustments to size 
standards for a number of industries to reflect current Federal and 
industry market conditions. The first comprehensive review was 
completed in 2015. Prior to 2007, the last time SBA conducted a 
comprehensive review of all size standards was during the late 1970s 
and early 1980s.
    SBA issued a White Paper entitled ``Size Standards Methodology'' 
and published a notice in the April 11, 2019, edition of the Federal 
Register (84 FR 14587) to advise the public that the document is 
available for public review and comments. The ``Size Standards 
Methodology'' White Paper explains how SBA establishes, reviews, and 
modifies its receipts-based and employee-based small business size 
standards. SBA gave appropriate consideration to all input, 
suggestions, recommendations, and relevant information obtained from 
industry groups, individual businesses, and Federal agencies in 
developing size standards for those industries covered by this proposed 
rule.

Executive Order 12988

    This action meets applicable standards set forth in sections 3(a) 
and 3(b)(2) of Executive Order 12988, Civil Justice Reform, to minimize 
litigation, eliminate ambiguity, and reduce burden. The action does not 
have retroactive or preemptive effect.

Executive Order 13132

    For purposes of Executive Order 13132, SBA has determined that this 
proposed rule will not have substantial, direct effects on the States, 
on the relationship between the national government and the States, or 
on the distribution of power and responsibilities among the various 
levels of government. Therefore, SBA has determined that this proposed 
rule has no federalism implications warranting preparation of a 
federalism assessment.

Paperwork Reduction Act

    For the purpose of the Paperwork Reduction Act, 44 U.S.C. Ch. 35, 
SBA has determined that this rule will not impose any new reporting or 
record keeping requirements.

List of Subjects in 13 CFR Part 121

    Administrative practice and procedure, Government procurement, 
Government property, Grant programs--business, Individuals with 
disabilities, Loan programs--business, Reporting and recordkeeping 
requirements, Small businesses.

    For the reasons set forth in the preamble, SBA proposes to amend 13 
CFR part 121 as follows:

PART 121--SMALL BUSINESS SIZE REGULATIONS

0
1. The authority citation for part 121 continues to read as follows:

    Authority:  15 U.S.C. 632, 634(b)(6), 636(a)(36), 662, and 
694a(9); Pub. L. 116-136, Section 1114.

0
2. In Sec.  121.201 amend the table ``Small Business Size Standards by 
NAICS Industry'' as follows:
0
a. Revise entries ``481219'', ``484122'', ``485111'' through 
``485113'', ``485119'', ``485210'', ``485410'', ``486210'', Subsector 
487, entries ``488210'', ``488490'', ``488510'', ``488510 sub-entry'', 
``488999'', ``493120'', ``493190'', ``512132'', ``512199'', ``512240'', 
``512290'', ``515111'', ``517410'', ``519110'', ``519120'', ``522110'', 
``522120'', ``522130'', ``522190'', ``5222210'', ``522310'', 
``522390'', ``524210'', ``524292'', ``524298'', ``531210'', ``531311'', 
``531312'', ``531320'', ``531390'', ``532282'', ``532283'', ``532289'', 
and ``532411'' and
0
b. Revise footnote 10.
    The revisions read as follows:


Sec.  121.201  What size standards has SBA identified by North American 
Industry Classification System codes?

* * * * *

                                 Small Business Size Standards by NAICS Industry
----------------------------------------------------------------------------------------------------------------
                                                    Size standards in
    NAICS  codes      NAICS U.S. industry title    millions of dollars    Size standards in  number of employees
----------------------------------------------------------------------------------------------------------------
 
                                                  * * * * * * *
----------------------------------------------------------------------------------------------------------------
                                  Sectors 48-49--Transportation and Warehousing
                                        Subsector 481--Air Transportation
----------------------------------------------------------------------------------------------------------------
 
                                                  * * * * * * *
481219.............  Other Nonscheduled Air       $22.0................
                      Transportation.
 
                                                  * * * * * * *
----------------------------------------------------------------------------------------------------------------
                                       Subsector 484--Truck Transportation
----------------------------------------------------------------------------------------------------------------
 
                                                  * * * * * * *
484122.............  General Freight Trucking,    $38.0................
                      Long-Distance, Less Than
                      Truckload.
 
                                                  * * * * * * *
----------------------------------------------------------------------------------------------------------------
                           Subsector 485--Transit and Ground Passenger Transportation
----------------------------------------------------------------------------------------------------------------
485111.............  Mixed Mode Transit Systems.  $25.5................
485112.............  Commuter Rail Systems......  $41.5................
485113.............  Bus and Other Motor Vehicle  $28.5................
                      Transit Systems.
485119.............  Other Urban Transit Systems  $33.0................
485210.............  Interurban and Rural Bus     $28.0................
                      Transportation.
 

[[Page 62401]]

 
                                                  * * * * * * *
485410.............  School and Employee Bus      $26.5................
                      Transportation.
 
                                                  * * * * * * *
----------------------------------------------------------------------------------------------------------------
                                     Subsector 486--Pipeline Transportation
----------------------------------------------------------------------------------------------------------------
 
                                                  * * * * * * *
486210.............  Pipeline Transportation of   $36.5................
                      Natural Gas.
 
                                                  * * * * * * *
----------------------------------------------------------------------------------------------------------------
                              Subsector 487--Scenic and Sightseeing Transportation
----------------------------------------------------------------------------------------------------------------
487110.............  Scenic and Sightseeing       $18.0................
                      Transportation, Land.
487210.............  Scenic and Sightseeing       $12.5................
                      Transportation, Water.
487990.............  Scenic and Sightseeing       $22.0................
                      Transportation, Other.
----------------------------------------------------------------------------------------------------------------
                              Subsector 488--Support Activities for Transportation
----------------------------------------------------------------------------------------------------------------
 
                                                  * * * * * * *
488210.............  Support Activities for Rail  $30.0................
                      Transportation.
 
                                                  * * * * * * *
488490.............  Other Support Activities     $16.0................
                      for Road Transportation.
488510.............  Freight Transportation       $17.5 \10\...........
                      Arrangement \10\.
488510 (Exception).  Non-Vessel Owning Common     $30.0................
                      Carriers and Household
                      Goods Forwarders.
 
                                                  * * * * * * *
488999.............  All Other Support            $22.0................
                      Activities for
                      Transportation.
 
                                                  * * * * * * *
----------------------------------------------------------------------------------------------------------------
                                     Subsector 493--Warehousing and Storage
----------------------------------------------------------------------------------------------------------------
 
                                                  * * * * * * *
493120.............  Refrigerated Warehousing     $32.0................
                      and Storage.
 
                                                  * * * * * * *
493190.............  Other Warehousing and        $32.0................
                      Storage.
----------------------------------------------------------------------------------------------------------------
                                             Sector 51--Information
----------------------------------------------------------------------------------------------------------------
 
                                                  * * * * * * *
----------------------------------------------------------------------------------------------------------------
                          Subsector 512--Motion Picture and Sound Recording Industries
----------------------------------------------------------------------------------------------------------------
 
                                                  * * * * * * *
512132.............  Drive-In Motion Picture      $11.0................
                      Theaters.
 
                                                  * * * * * * *
512199.............  Other Motion Picture and     $25.0................
                      Video Industries.
 
                                                  * * * * * * *
512240.............  Sound Recording Studios....  $9.5.................
 
                                                  * * * * * * *
512290.............  Other Sound Recording        $20.0................
                      Industries.
----------------------------------------------------------------------------------------------------------------
                                  Subsector 515--Broadcasting (except Internet)
----------------------------------------------------------------------------------------------------------------
515111.............  Radio Networks.............  $41.5................
----------------------------------------------------------------------------------------------------------------
 

[[Page 62402]]

 
                                                  * * * * * * *
----------------------------------------------------------------------------------------------------------------
                                        Subsector 517--Telecommunications
----------------------------------------------------------------------------------------------------------------
 
                                                  * * * * * * *
----------------------------------------------------------------------------------------------------------------
517410.............  Satellite                    $38.5................
                      Telecommunications.
----------------------------------------------------------------------------------------------------------------
 
                                                  * * * * * * *
----------------------------------------------------------------------------------------------------------------
                                    Subsector 519--Other Information Services
----------------------------------------------------------------------------------------------------------------
519110.............  News Syndicates............  $32.0................
519120.............  Libraries and Archives.....  $18.5................
 
                                                  * * * * * * *
----------------------------------------------------------------------------------------------------------------
                                        Sector 52--Finance and Insurance
                           Subsector 522--Credit Intermediation and Related Activities
----------------------------------------------------------------------------------------------------------------
522110.............  Commercial Banking \8\.....  $750 million in
                                                   assets \8\.
522120.............  Savings Institutions \8\...  $750 million in
                                                   assets \8\.
522130.............  Credit Unions \8\..........  $750 million in
                                                   assets \8\.
522190.............  Other Depository Credit      $750 million in
                      Intermediation \8\.          assets \8\.
522210.............  Credit Card Issuing \8\....  $750 million in
                                                   assets \8\.
 
                                                  * * * * * * *
522310.............  Mortgage and Nonmortgage     $13.0................
                      Loan Brokers.
 
                                                  * * * * * * *
522390.............  Other Activities Related to  $25.0................
                      Credit Intermediation.
 
                                                  * * * * * * *
----------------------------------------------------------------------------------------------------------------
                            Subsector 524--Insurance Carriers and Related Activities
----------------------------------------------------------------------------------------------------------------
 
                                                  * * * * * * *
524210.............  Insurance Agencies and       $13.0................
                      Brokerages.
 
                                                  * * * * * * *
524292.............  Third Party Administration   $40.0................
                      of Insurance and Pension
                      Funds.
524298.............  All Other Insurance Related  $27.0................
                      Activities.
 
                                                  * * * * * * *
----------------------------------------------------------------------------------------------------------------
                                  Sector 53--Real Estate and Rental and Leasing
                                           Subsector 531--Real Estate
----------------------------------------------------------------------------------------------------------------
 
                                                  * * * * * * *
531210.............  Offices of Real Estate       $13.0 \10\...........
                      Agents and Brokers \10\.
531311.............  Residential Property         $11.0................
                      Managers.
531312.............  Nonresidential Property      $17.0................
                      Managers.
531320.............  Offices of Real Estate       $8.5.................
                      Appraisers.
531390.............  Other Activities Related to  $17.0................
                      Real Estate.
----------------------------------------------------------------------------------------------------------------
                                   Subsector 532--Rental and Leasing Services
----------------------------------------------------------------------------------------------------------------
 
                                                  * * * * * * *
----------------------------------------------------------------------------------------------------------------
532282.............  Video Tape and Disc Rental.  $31.0................
532283.............  Home Health Equipment        $36.0................
                      Rental.
 

[[Page 62403]]

 
                                                  * * * * * * *
532289.............  All Other Consumer Goods     $11.0................
                      Rental.
 
                                                  * * * * * * *
532411.............  Commercial Air, Rail, and    $40.0................
                      Water Transportation
                      Equipment Rental and
                      Leasing.
 
                                                  * * * * * * *
----------------------------------------------------------------------------------------------------------------
Footnotes
* * * * *
\8\ NAICS Codes 522110, 522120, 522130, 522190, and 522210--A financial institution's assets are determined by
  averaging the assets reported on its four quarterly financial statements for the preceding year. ``Assets''
  for the purposes of this size standard means the assets defined according to the Federal Financial
  Institutions Examination Council 041 call report form for NAICS Codes 522110, 522120, 522190, and 522210 and
  the National Credit Union Administration 5300 call report form for NAICS code 522130.
* * * * *
\10\ NAICS codes 488510 (excluding the exception), 531210, 541810, 561510, 561520 and 561920--As measured by
  total revenues, but excluding funds received in trust for an unaffiliated third party, such as bookings or
  sales subject to commissions. The commissions received are included as revenues.
* * * * *


Jovita Carranza,
Administrator.
[FR Doc. 2020-21593 Filed 10-1-20; 8:45 am]
BILLING CODE 8026-03-P

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